Woah! Great fic. Intersting to see one that doesn't have Naruto as a Shinigami or a Hollow, or completely immersed in the Bleach universe already. While somewhat fast paced there is good characterization, great fights, humor, and a few hints of romance as well. It makes a goo combination.
I like that Naruto's not an instant sword master. While Naruto's attacks with Benihime are powerful there's still room for a lot of improvement. I look forward to seeing how he improves under Hayate and, hopefully, Jiraiya. It should make for an excellent combination. His development as a character and a fighter are a bit rapid in some ways, but not totally out of place given the situation he's in, and the type of person he is. I liked his interactions with TenTen, Neji, Sakura, and Kakashi, it was still Naruto, but different.
I also like Kakashi's characterization, he's a jerk who's set inhis ways a beliefs, but he's not on the 'kill the demon brat' bandwagon. Still I can't wait to see what happens when he has to admit to the Hokage and the Jounins that he's taught Naruto and Sakura jack.
I'm looking forward to seeing how the Chuunin exam finals shape up as well as the Sand/Sound Invasion and other Naruto arcs. I'm also looking forward to seeing what happens when Bleach characters show up.
I look forward to your next chapter.