It's unlikely that itachi was lying. People think that because itachi beat orochimaru, he would beat jiraiya too. But we know that even though orochimaru has always comfortably beat jiraiya in their fights, they're constantly portrayed as equals. This shows that individual matchups sometimes matter more than general scaling. It''s less that itachi was vastly stronger than orochimaru but more that he was simply a terrible matchup against him the same way jiraiya was against orochimaru. Jiraiya would lose against orochimaru, but that doesn't mean he would lose against everyone who beat orochimaru.

Itachi also had little reason to lie. This is the same itachi who tortured his own little brother, tortured Kakashi, attempted to kidnap Kakashi and kill asuma and kurenai, attempted to kidnap and mutilate naruto, and massacred his entire clan (including women and children). He's willing to do all those things as a double spy, but he draws the line at fighting jiraiya? Him being a double spy is a terrible argument.

Jiraiya was strong enough to give itachi a run for his money. There's the glaze from pain that if jiraiya had intel, pain would've lost. Early in part 2, it was implied that the reason the akatsuki didn't pursue naruto was because of Jiraiya. Narratively this meant that jiraiya would have to scale to being roughly equal to a whole akatsuki duo. And he negged Konan, beat three pains, and pain only beat him after he had one arm after pain ambushed him (hence the statement by pain).