To understand a little of the exchange that transpired between Moshe Rabbeinu and his father in law, we must first raise our level of expectations to match their great stature. Yisro had already studied all the religions in the world, not only through library research, but through personal experience. He was a master of understanding and surely knew that each of the religions had tremendous spiritual powers to offer. What he also knew was that none of them was all-inclusive.
"Vayesaper Moshe", Moshe Rabbeinu taught Yisro the secret of the holy Sephiros, the complex system of Hashem's Attributes through which He directs the world. "Vayichad Yisro", Yisro perceived the Oneness of the whole universe, on all its spiritual levels. He then said, "Now I know that Hashem is greater than all the other powers." Isn't that a strange reaction? He should have said that Hashem is the only Power. What comparison was he trying to do?
Often people get confused when asking questions about Hashem. There is one important rule to be remembered about Him. Unlike anything else we know, He exists without the world existing and yet He exists within the world as well. We cannot understand this concept but we must remember it. When Yisro said that Hashem is "Gadol" he meant that unlike all other powers, he is not restricted to this world. It is true that there are many spiritual powers in this world, but not only do they all stem from Him, they all stay within the system, they are all limited, they are all small.
Adapted from Rabbi Vali's book on Shemos. Questions and subscriptions can be mailed to: the Yeshiva