Yea there is a lot of confusion about this. Most people think that because it's his last form (that we see) that it is automatically his strongest. It is actually his first form. So in theory it should be his weakest form. This is where the confusion comes in.
Now let's take a look at his history:
Bibidi creates Kid Buu.
Kid Buu kills the female Kai.
Kid Buu absorbs the muscular Kai.
That Buu absorbs Fat Kai.
Here we have Fat Buu.
The explanation is that those absorbtions made him less evil and thus "weaker".
Now we're at the Buu saga.
So let's look at all his forms as we see them:
Fat Buu
Skinny Buu
Majin Buu
Super Buu (Piccolo + Gotenks)
Super Buu (Piccolo + Goten + Trunks + Mystic Gohan)
Kid Buu
Ok so those are all his forms for the most part.
Fat Buu (good) and Skinny Buu (evil) seperate.
Skinny Buu eats Fat Buu.
Majin Buu is here.
Ok so now all that's really changed is that he is more evil, and probably a better fighter. Seeing that he hasn't absorbed anything other than his alter ego, he shouldn't be that much stronger.
Majin Buu absorbs Piccolo and Gotenks.
Super Buu is born.
Super Buu is stronger thanks to the Gotenks Fusion. Piccolo's power doesn't really help him, but it makes him smarter.
Gotenks Fusion runs out and Super buu is practically back where he started.
Super Buu absorbs Mystic Gohan.
This is Buu's strongest form.
Vegetto pwns the crap out of Super Buu.
Everyone gets released from inside Buu.
Buu reverts back to his weakest (but most evil) state.
So here we have Kid Buu, who is far weaker than any of his previous forms, but "pure" evil.
Now you may ask, "If Kid Buu is the weakest form why didn't Fat Buu beat him?" My answer to that would be the same reason Kid Buu defeated Fat Kai the first time. Think of Fat Buu as the Fat Kai. He doesn't have the added power of Kid Buu anymore because they are now two seperate beings.
I hope this helps people understand how that works. It may not be 100% accurate but it is what I gathered from the show.