: : And the reason why the Istari were required not to reveal themselves fully appears to be that it would have undermined their mission. They could have become objects of reverence and veneration, and they would have been like lords opposing another lord, and not merely counsellors to Elves and Men, whom the Valar hoped would oppose Sauron of their own free will.

[snip again]

: I aggree with all the points above but also thought of something else. It is much easier to be underestimated (especially, by your enemies) if you look old & weak. That is to say that if the enemies of the Istari saw them walking down the road they would think nothing of an old man but would certainly be interested if they saw a mighty, shining, ageless being. It is a way of keeping themselves hidden and in so doing, giving themselves an extra advantage.

Good point Fangorn.

As a general point however, I seem to remember reading (unfinished tales maybe?), or maybe I'm just making this up as I go along (wouldn't be the first time), but the Valar, given the mess that they made in previous interventions by using force, decided that it would be wiser to use gentle persuasion on this occasion, consequently they sent their envoys in the guise of wise old men.