All right, so Piccolo sensed the entire battle between Cell, Veggie, and Trunks. He should know exactly what kind of power they're dealing with. That panel posted above with him saying he'd need to take his turn in the Room of Spirit and Time happened before Trunks and Vegeta returned to the Lookout, so what could've been on his mind at that point? Trunks and Vegeta both admitted they needed to use the Room again just to even stand a chance, although Vegeta was more adamant that he'd rape Cell given another go-around (before he knew about the 48 hour restriction, mind you).
Goku and Gohan came out of the Room and, after they were briefed on the situation, Vegeta bluntly asked Goku if he thought he could beat Cell, to which Goku said he didn't know because he hadn't seen him in his perfect form yet. When Goku visited Cell, he said it would be a good fight, and Cell said it would be more fun than he expected. When Goku came back to the Lookout, Trunks asked what he thought, and Goku said he didn't think Cell would get that much stronger, that there was no way of knowing just how strong Cell was if he actually got serious. So already we know that Goku can tell that Cell was way stronger than before just by looking at him, and that there's a lot more in the tank. He admitted he probably didn't stand a chance against Cell the way he was.
Trunks admitted he was afraid Cell would be "that powerful," although what he was basing that on, I'm really not sure because Goku was still in his resting state at that point; maybe he just figured Cell truly was holding back a lot, and Goku simply confirmed his suspicion. Piccolo recommended Goku use the Room again, and was shocked when Goku declined. Goku proudly proclaimed that he was a lot stronger than Vegeta when Vegeta chimed in after that.
When Goku powered up in front of Karin, there was no mystery. He was a Super Saiyan, just like he had been the entire time since leaving the Room, and even more especially after Vegeta just scolded Trunks about thinking Goku would utilize another transformation. By that point, they all knew what kind of power was necessary to compete with Cell since they now had a hit on Goku's power, which they obviously couldn't gauge earlier.
Cell (Goku's/Korin's expectation) > Goku (100%) >>> Cell (Vegeta's/Trunks'/Piccolo's expectation) > Goku (50%) >>> SSJG2 Vegeta, at the very least, because I don't think anybody was taking into consideration the power of Grade 3 at that point since it'd been deemed utterly useless.
Goku was the one that initiated the conversation with a post-RoSaT Piccolo, and Piccolo immediately told him to stop bullshitting because he knew he was trash.
Chapter: 392 (DBZ 198), P13.1-5
Goku: “Hey… Piccolo! Did you go into the Room of Spirit and Time?”
Piccolo: “Indeed.”
Goku: “I can tell! You’ve risen to an entirely different level.”
Piccolo: “…Why don’t you just be frank with me? I’ve grown stronger, but even so, it won’t do any good against Cell…”
Goku: “…Yeah, it won’t do any good.”
I can see what some are saying about this essentially being a useless passage if Piccolo hadn't at least risen to a competitive level with the power Goku had shown earlier. It would explain Trunks' reaction if that was the case, which would indicate Trunks most likely had a different expectation of Cell's power than Piccolo.
Trunks later asked Goku why he was so calm, citing some hidden weakness as the cause for Goku's cheerful attitude. When Goku shot that down, Trunks' hope was dashed. He later asked Gohan why Goku wasn't taking things as seriously as everyone else, including the fact that Goku admitted Cell was stronger than him, so we know Trunks had no idea Goku was holding back power. When everybody arrived at the ring and Goku volunteered to go first, Trunks had that same WTF look from earlier and questioned if they should really start with Goku. I guess you could take that one of two ways. The first, he somehow got it into his head that Goku was truly the strongest and was their best chance; the second, he thought he was stronger than Goku (because status quo and Vegeta > 50% Goku) and didn't know if starting with someone weaker would be a smart idea. I personally go with the latter, which I feel is reinforced when Trunks said they'd finally get an answer for Goku's joyousness right before the fight started.
I question if Piccolo even figured Goku was holding back, because in that conversation with Gohan about Goku's attitude, Krillin added that Goku probably had a plan, and then Piccolo retorted that he was more likely just being
fatalistic (Viz), after which everybody went silent as if they accepted it. If Piccolo really thought Goku was holding back a noticeable amount of power, why would he not bring that up then? There was no reason to hide such a notion, and Goku holding back would've probably been more of a motivator than a detractor to the group morale.
It's likely Vegeta also didn't think Goku was holding back because of his gung-ho attitude about facing Cell and having no issue with allowing Goku to go first. His "show me what you can do" statement as Goku stepped up to the plate can be taken either way, I guess, but he did shit himself and say "so that's his true power..." when the gloves came off against Cell.
One thing is clear from all of this, and that's that nobody figured on Goku being as strong as he was, and therefore nobody had a good idea of what to expect with Cell (which also means Piccolo didn't hear jackshit from all the way up on the Lookout with his super duper movie ears).
Cell (Goku's expectation post-warmup) > Cell (Goku's/Korin's expectation) >= Goku (100%) >> Vegeta (2nd RoSaT) >= Trunks (2nd RoSaT) > Cell (Vegeta's/Trunks'/Piccolo's expectation) > Goku (50%) >~ Piccolo (post-RoSaT) >>> SSJG2 Vegeta >>> Piccolo
But even after reading through all of that again, I don't see what would actually put Piccolo
above 50% Goku, much less nearing Trunks and Vegeta.