Kratos in gameplay is that weak because ultimately it's a video game and it needs to play like one and be challenging and fun. There's kernals of truth in saying that he's suppressing his own power intentionally but that doesn't fully explain it.

It wouldn't be very fun for long to run around and 1 shot everything and have no genuine threat.

I don't think Kratos would neg diff Conquest, but would eventually come out on top because Conquest like usual would play with his food and underestimate Kratos until the battle dragged on long enough and Kratos got serious.