All in all, i'd have to go against the tide and say that he can't fight; at least, not on the same level as the Shichibukai or the stronger pirate captains. I have two decent reasons for this assuption, although i'm not sure if they match up to some of the reasons already given.
First, the navy, while a militaristic organization in nature, isn't all about strength. Captain Nezumi, that rat-fink who bargined with Arlong, was just a normal human, while Smoker, at that time of equal rank, is obviously much stronger; also in that area of the story was Commodore Purin-Purin, who's ship was easily sunk by Arlong's underlings despite his superior rank. Therefore, we can't assume that, just because Sengoku holds the highest position and at least two of the three admirals directly below him are insanely powerful, that he himself could kick their asses easily.
My other point is his attitude. He brushes aside underlying tasks when something big's on the way, and he gets annoyed at Garp when said vice-admiral acts care-free. This is the sort of attitude that seems to show up a bit in the weaker characters in One Piece, where they can't quite seem to handle the idiocy of the people around them and otherwise lose their cool. Spandam was shown the same way, being annoyed at his fellow CP9 members at times and bossing around his underlings elsewise, seemingly under the impression that his rank actually merited respect and complience. Nezumi also acted that way, at least when he was yelling about Luffy's bounty after having his ass handed to him. As opposed to the people confident in thier strength, Sengoku seems mostly anxious about these things, as if his power isnt enough.
The thing that worries me, though, is his nickname. Since Luffy was, in part, based off of Journey To The West's main character Sun Wukong, who was himself trapped under a mountain by the buddha long before the journey itself started, i can't help but feel that, at some point, Sengoku's gonna lock Luffy up by showing how he got to be called the buddha. Of course, it could also be that he was called that because of his nature, but seeing how he acts, i find that hard to imagine.