I agree that anyone at any point should be able to learn a jutsu, however if a genin for example knew a jutsu that took a lot of chakra, or perhaps jonin or chunnin levels of chakra to actually use, he could not actually do it until he/she had the proper amount of chakra to actually perform the jutsu. Also, even if they can't perform the jutsu successfully, they should be able to practice the jutsu so as to lower the base chakra or perhaps even hand seals required to perform it, this would also help the player memorize the justu so when the character has enough chakra to perform the jutsu successfully they may not exactly have as much trouble memorizing the hand seals. Perhaps as well if they tried to perform the jutsu in combat they might just waste their chakra since they have not built up their base level of chakra enough to perform it.

Personally I think that the clothes shouldn't give stat boosts. perhaps special clothes like some legendary shinobi mask or something and even that should give a minimal boost. I think that someone who just spawned in should be able to be in direct competition with some one who has been on for a while, the only difference being the skill and power the one who was on longer had obtained through training and experience, not just 'cause the older one has "boots of extreme speed" "shirt of mediocre defense" and "headband of chakra concentration." 

On the other hand for weapons a kunai will kill you just as dead as a huge sword. sure sure mechanics and stuff but realistically they are both just sharped pieces of metal.

Jutsu Name: All is One, One is All
Jutsu Type: GenJutsu
Jutsu Description: The caster of the jutsu causes the target to see himself as other people (so the target for example would see the caster as the target's character as well as the target's allies. The target sees himself as all other players)
Jutsu Level:Expert,Master
Chakra Nature: N/A
Jutsu Range:Low
Effects if hit:The target now sees everyone as him or herself for 1 minute. The time gets longer depending on the strength level of the jutsu (1-3) and how much chakra the caster puts into the jutsu.

Great idea dude, that sounds awesome.

Jutsu Name: Raining Heavens
Jutsu Type: Ninjutsu
Jutsu Description: Meteorites rain down around you with you safe at the center.
Jutsu Level: Master
Chakra Nature: Fire and Earth
Jutsu Range: Large
Effects if hit: Meteorites fall all around you for 7 seconds, damaging both allies and enemies alike. meteorites deal splash damage with more damage being dealt the closer you are to the impact sight and victims have a 25% chance of catching fire and being dealt burn damage.
Recommended Number of hand seals: 10
Why this is not op: It requires 10 hand seals, which makes it complicated to pull off in a combat scenario, which is required as it is an area of effect jutsu around you. It also leaves a safe zone around your immdiate area, which anyone can take advatadge of. It's not very effective against taijutsu users. Also, no one is safe including your allies and yourself if you move (or are removed) from the safe zone.

At first I didn't like the idea of not having a menu for quick refrencing jutsus but upon reflection I really like it. I would also like it if there was a way players could teach or share jutsus. For example, let's say i was the leader (or at least apart) of a mean (not necesarily evil) organization and there was a new recruit. Maybe he's kinda weak, or just simply more or less a fresh spawn. Perhaps on a mission (i don't mean a in game mission system, I mean the boss told me to go do something and so I must do it, or he'll be mean to me (kill me very violently)) and the new guy's my partner. Clearly i want to beef the new guy up, so I teach him/show him a jutsu or two he could perform at his level. I would love something like that, beyond the realness and perma death, it adds another reason to be friendly. It could also open the path to perhaps a risk to teaching it. Let's say that new recruit is a dude like Orochimaru, wanting to learn as much jutsu as he can, he acts weak around me, trains in secret and one day when i've taught him all the jutsu I can (or at least say I have) he stabs me in the back and moves on to learn more jutsu. I do not know how well this idea would be accepted, but it would add to the realism. In Naruto, people teach people Jutsu. In real life, people teach others how to do things and the student in both cases is more or less free to do as they please with the Jutsu/skill. Please, consider this. And remeber, knowledge is not power, it is potential power.

I like the idea of choice but i want some way to have both, but it must be difficult. While infinite chakra and forbidden jutsu is a bad combo, it is a realistic combo. Maybe just simply make it so that the forbidden jutsus can not be used during senjutsu mode (not sage mode though, i assume that's too closely related to naruto) So make the infinite chakra have some sort of transformation or other drawback. I really would like to have both. Think of Naruto, he has both kinjutsu (shadow clone jutsu, though personally that doesn't seem very forbidden concidering the amount of people able to do it.) and senjutsu. Just something to concider.