At the Height of their power Indoril would smash any and every house. Hell the Hands of Almalexia and High Ordinators alone could go in and wipe out the entire upper echelons of most of the other houses excepting Telvanni of course. Add the Ordinators and Buoyant Armigers to the list as well, because pretty much everything with the Temple seems like it has to do with with Indoril to some extent. Then look at the landholdings and such too. Then add in the assistance of a God and possibly of Nerevar Indoril himself and you have a tactical genius the like of which has not been seen since excluding Tiber Septim and possibly Saint Alessia. Then a living breathing divine being in the form of Almalexia and possibly Vivec as well as Sotha Sil siding with them. It just is kind of a no brainer imo. Even without the living gods they seem incredibly formidable. Then again we did not see the other cities where other houses likely held most of their power. We saw Vivec City and Mournhold which were both pretty much Indoril influenced cities.

We did say at the height of their power though. What if Hlaalu asked Tiber Septim for aid via Numidium? Deal breaker, idk when Hlaalu's exact height of their power would be, most likley around the end of the 3rd Era but if they had access to a working Numidium for any amount of time then they would indeed win without a doubt. Hlaalu could also hire the entire Morag Tong to take out many if not most of the targets.

They don't flex their muscles because of their incompetent leadership perhaps? Because they can't put their act together? Yes, Telvanni have potential of being powerful house, most powerful perhaps, but it seems that they have leadership issues, genius-lunatics focusing more on their own goals than in mutual benefits. However if they can put their act together under competent leader (which they have aswell) they probably are one of the most powerful house.

The "At the height of their power" bit distorts things, as each house had their ascendency at a different time. The answer to that question is clearly Indoril, as Indoril's prime also involved the greatest leader any house has ever known, Lord Indoril Nerevar. Any all out war with Nerevar involved would end with Indoril's victory (lets not forget his three great generals either. Divayth Fyr has nothing on Sotha Sil.

I'm willing to bet there are more powerful mages in Alinor, but your right when you say "that we know of"

When have an idea. They apparently have the know how to stop a minor God from crashing into Nirn. Impressive I'd say.