Okay here is the next chapter. Sorry it took a while. I've been working on this for a while, but I had to keep revising it.
A disclaimer a day keeps the soulless, heartless lawyers away. You hear that Kishimoto? I admit that I do not own Naruto
"The story of how the Elemental Nations came to be started with the man who became known as the Rikudo Sennin and the Juubi. The Juubi was a terrifying creature, a monster that lived only to kill and destroy. Eventually the Juubi was defeated and sealed within the man who became known to us as the Rikudo Sennin. With the power of the Juubi coursing within him, the Sennin became a powerful and wise man. Under his teaching, the age of the modern ninja began.
The Rikudo Sennin traveled across the continent teaching anyone and everyone about the uses of chakra. After a few years, he settled down. Many who are believe they know about the history of the Elemental Nations agree that the Rikudo Sennin had only two sons. But they don't know that they are wrong. The Rikudo Sennin had three sons. The child that came to be known as the Eldest Brother and the father of the Uchiha clan was merely the middle child. The Rikudo Sennin's true eldest son is one of the greatest hidden secrets in history. While he was powerful, he tended to avoid the public eye, preferring his quiet life in the forests. But from we can gleam from documents saved over the years by the descendants of the Three Brothers, we can see that it was the Eldest Brother who was the peacemaker, often by force, for his family.
At the Rikudo Sennin's deathbed, he granted his sons each a piece of his essence. To the eldest brother, he gave his mind. To the middle brother, he gave his eyes. To the youngest brother, he gave his body. However, contrary to belief, the Rikudo Sennin did not name a successor, believing that each of his sons will carry on his will in their own ways. Saddened by their father's death, but satisfied by their gifts, the three brothers separated, never to see each other again. During their travels, each child taught their skills.
The Young Brother traveled north. He eventually settled in the area now known as the Land of Earth. The Middle Brother traveled west and settled in the area now known as the Land of Wind. The Eldest Brother did not settle in one area, preferring to travel everywhere.
Wherever these three brothers went, they shared their father's and their own knowledge about chakra and their own techniques. The Youngest Brother was a skilled martial artist and weapon specialist. His techniques led to the creation of taijutsu and weapon techniques. The Middle Brother loved to showcase his abilities with chakra, and from him we gained ninjutsu. The Eldest Brother enjoyed tinkering with reality and so he created what became to be known as genjutsu and fuinjutsu. The people that they shared their teachings with eventually began to travel and mingle with each other, sharing the brothers' knowledge. Those who found certain abilities or techniques they preferred tended to rely solely on them.
With the tendency to rely on certain techniques, the bodies of each user began to adapt, creating what we know as bloodline limits. Those depended on fire-based techniques gained fire based bloodlines such as the Blaze Release Those who depended on water, created the now extinct Water Release. This was the same with the other elements. When users of these bloodlines learned how to fully control their abilities, they began to experiment and evolve their bloodline abilities. That is where bloodlines such as the Lava Release and the Boil Release come from. While bloodline abilities did come from a dependency on a certain element, there were other bloodlines that were created from the overuse of chakra itself. One such example was the Swift Release. Users of the Swift Release often used chakra to augment their speed by adding chakra. Eventually, their bodies adapted and their natural speed began increasing, creating the Swift Release, however over time this bloodline began to change due its ever changing use.
Now finally, we come to the doujutsu – the fabled eye based abilities. There are only three known eye abilities: the Byakugan, the Rinnegan, and the Sharingan. The Rinnegan was held by the Rikudo Sennin. However it is believed that all of his direct descendants have the potential to unlock it. A variation of the Sharingan manifested in the Middle Brother. Over the years it evolved with its current form being used by the last of the Middle Brother's descendants: the Uchiha clan. Finally, there is the Byakugan. The Byakugan manifested itself in the people who are now the Hyuga clan. However, you should note that the Byakugan was first developed as a means to scout and forage for food by a nomadic tribe. Over time, it developed into what is today.
While all ninja have a connection of sorts to the Rikudo Sennin, only four living clans can claim a direct connection: The Uzumaki, The Uchiha, The Senju, and The Hyuga. The first three are the last of the direct descendants of the three brothers, while the ancestors of the Hyuga were personally taught by the Rikudo Sennin himself."
Naruto was shocked by this.
"Okay, but what does that have to do with you, the Yamanaka, and bandages, or even with the world?"
"Allow me to explain", said Danzou. "Though the Haruno and Uzumaki are cousins, they are merely fourth cousins. The Yamanaka clan for most of their history has been apprenticed to either the Haruno or the Uzumaki clan. As for my myself, my family has been avoided. The Shimura family has always been an odd one. The Shimura family was the result of a child born with the genes of both the Uchiha and the Yamanaka. Because of this, the first Shimura was made an outcast, but eventually he created his own family."
"I will take if from here Danzou", said Inoichi. "I think he's going to start overloading from all the information"
"Naruto", he said looking at him sternly.
"While a rare few know about the truth of the Rikudo Sennin and his family, those who know will undoubtedly figure out that are a descended of the Eldest Brother. Not only that, but they will realize that the most feared bloodline in history survived extinction and will stop at no cost to kill you or kidnap you and harvest your genes."
Naruto turned green at this revelation.
"Okay! Okay!" he yelled. "I won't use my powers unless I absolutely have too."
"Good. And tomorrow, after the Academy lets out, you will report to me for your first lesson", said Sayuri.
"Ancient Art: Silent Seal Release!" yelled Inoichi.
"Ancient Art: Mind Wipe!" yelled Danzou.
And time resumed once again. However everyone in the council chambers could not remember why they were gathered.
"Does anyone remember what we were doing?" asked the Hokage.