I don't see Jiraiya dying, at this point he's the most powerful ninja in Konoha and if he can't beat Pein, who can? It took 3 years of training under Jiraiya's guidance for Naruto to be in Kakashi's league, he isn't going to magically become superior to Jiraiya anytime soon. Jiraiya is capable of fighting a four-tailed Naruto and win, and we saw what one-tailed Naruto could do in the Valley of the End.
People could say that Naruto can just get more tails and beat Pein, but by the time Naruto gets 4 tails, Naruto is in the process of dying and the Kyuubi is basically in control... if Naruto were to get 5 tails, he could cease to exist.
Anyway, Jiraiya's death has been foreshadowed... but it's basically blocking out the sun. I mean, he has had 4 entire chapters all to himself... just him, nothing else, 4 chapters. Everyone else's foreshadowing of death were limited to a couple panels here and there. Kishimoto just wants us to believe he's going to die.
Anyway, based on the new information revealed in this chapter, I tried to do some research. I believe the sannin were around Kakashi's level 25-ish years ago when they fought Hanzo, and they have gotten stronger since then (except Tsunade who has been out of the "game" for nearly 20 years and was just somewhat better than Kabuto who was stated to be at Kakashi's level, which is what I'm basing my opinions of the younger sannin on).
So I was wondering, if Hanzo was powerful enough to kill the three of them right then and there, why would he just let them live? They were obviously powerful and letting them live just meant that they'd continue to fight against his forces in the war... that logic bothered me. But then I tried reading between the lines, he said "I'll let you live. This battle will... in all likelihood end in Konoha's victory." Now I noticed he said "battle" and not "war," which leads me to believe he was talking of the current situation, which means he wasn't sure if he could beat the three of them. He then goes on to admit that they are powerful and shows them his respect... I believe that in his pride, he was negotiating a mutual retreat. In his own way, he was saying that it's not cowardly to retreat, and that he will honor them if they do.
Also something else I noticed, it was never shown or stated whether or not Jiraiya, Tsunade, and Orochimaru accepted Hanzo's offer or not. They may very not be the sannin because they left, but because they defeated him.
Now to judge their strengths based on this, I would put Hanzo's power in the same catagory as Jiraiya right now, since I think three people of Kakashi's ability could manage a victory over Jiraiya. But I also think Hanzo was much older than them since he has lines on his face, which means his loss to Pein could be under the same circumstances that Sarutobi's loss to Orochimaru was... he wasn't what he used to be. This could mean that both Pein and Jiraiya are on nearly the same level.
As for the fight itself, I think those six bodies we saw in suspended animation are actually sacrificial bodies for Pein's Shapeshifter technique... y'know, the one he used to create exact copies (albeit limited since Itachi and Kisame only gave 30% of their chakra to create them) of Itachi and Kisame that they controlled from a remote location. And it was stated that 100% Jiraiya > 100% Itachi + 100% Kisame. I think this is a great way for Jiraiya to kick *** and not take away any hype from Pein.