I personally don't think Kratos is overpowered as a playable character, but he's definitely overpowered cutscene wise. I don't consider his O moves to count as actually playing with him, since you basically just see him pwn the crap out of whatever he's fighting. Anyway, when controlling Kratos compared to someone like Dante from Devil May Cry, Kratos falls dramatically in terms of speed and power, but because of his unholy broken R1 button (guard), his defensive capabilities are far better than most.
Speaking of Dante, he suffers from the same things as Kratos, looking too cool in cutscenes and sort of failing outside of it. I suppose Dante only suffers from it when playing on any difficulty above Normal, seeing as the enemies become ridiculously powerful and tank (not so much for Hard mode, but Dante Must Die definitely).
A lot of video game characters suffer from the effect of being shown as stupidly strong or even godlike in cutscenes, and not be able to deliver in actual game play. Some examples are; KOS-MOS (Xenosaga), Lightning (FFXIII) and Cole (inFamous)
Then you have characters that are as strong or even stronger than they are made out to be. I suppose these characters are mostly Crouching Moron Hidden Badass characters, and then some are just supposed to be overpowered. Some of you guys have mentioned some already, but I'll list them anyway.
Crouching Moron Hidden Badasses:
Colin (Advance Wars)
Sazh (FFXIII)
Milanor (Yggdra Union)
Marshall Law (Tekken)
Just plain overpowered:
Lu Bu (Dynasty Warriors)
Alex Mercer (Prototype)
Sturm (Advance Wars)
Any legendary Pokemon
Nero (Devil May Cry 4)
I think most of the Crouching Moron Hidden Badass characters are either poorly written, or the developers get a kick out of making joke characters overpowered.