Maybe it's just me, but I say go Genin. If the RP were relatively long, it could make for some interesting developments and events, such as the exams and the gradual growth of strength in the members as they grow from Genin to Jounin. I like the idea of starting small and gradually working towards a larger future, much in the way the series does (and possibly better), but that's just me.
Whilst I think that would be great, typically it takes years and years to go from stage to stage. It would either feel like there is a rush to get promoted or there would be a lot of unequal power amongst the group.
Jounin or Chounin would work best I think, with a solid story for the squad (some minor missions, some kind of serious thing they must overcome as a group).