The issue with this thing is that going with one side often raises a number of questions.
Let's break down a few things. First off, it's been established that, so far, the only way to gauge power is by chi sensing, watching movement, or using a scouter-like device. We good here?
Up until Piccolo's match, according to Vegeta, they haven't even been able to estimate Kaioshin's power. That's interesting, seeing as how Goku did just that with Dabura after seeing him move once in a suppressed state. It's safe to say that they feel some kind of life force from Kaioshin as they don't note any lifelessness from him as they do Spopobitch, but even then they're clueless.
Anyway, Piccolo steps into the ring with Kaioshin and - this is important - he notes that he "can't" fight this guy and can't figure out why for the life of him. At this point, at the very least, it has nothing to do with power, as far as we can tell.
Correct me if I'm mistaken, but Kaioshin thinks that Piccolo is figuring out who he is and tells him some shit like "you'll know soon." Piccolo flips out and quits.
To connect a few more dots: Kaioshin read Piccolo's mind and saw that Piccolo is thinking about his identity. To this, he speaks as though Piccolo has spoken out loud and says whatever cryptic trash he said, like he's responding. Piccolo, in response, freaks and quits. Weirdo...but you see the lines I just drew here, right?
Let's establish something important. What I just did is called a close reading. Or something like that. Okay, maybe not in the most literal sense, but it's close enough. You could say that I'm taking this kids comic way too seriously. Of course, if you actually tell me that then I'll just leave you here with p123. I just don't want people telling me I'm full of conjecture or whatever over something like this. Feels like a buzzword now, no offense.
Question #1: Where did power come into play in all that? If you think I left something out on purpose, feel free to point it out and I might concede this point.
Question #2: Does Piccolo have some way of sensing a Kaioshin's power that all of the others don't? Is it because of his Kami side or something? How do you figure, if so? (I hereby give p123 the right to use the term "conjecture" as liberally as possible for me here...jk
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I got carried away so I'll leave with this as I go to take a shower: how does Goku take this information? He seems expectant that Piccolo figured something out. Sounds like something that helps your case, eh?
I apologize for the length, folks >
Edit: Any perceived condescension is all casual jest. We're all friends here.