Yes and No.

A ton of people did not upgrade Sasuke right away when I played the unofficial version of this game years ago. His jutsu becomes a 60 cost to pull off, it becomes an area change which has weaknesses, and it costs him his attack for the turn if you use it to buff before attacking. Not to mention he LOSES the Curse Mark passive which can really help turn him into a damage dealer.

2-star Sasuke is often the BETTER option, especially for Lightning specs that want to pull off quick combos before they die. For the early part of the server at least when everyone is using 2-star ninja it's sometimes advisable not to upgrade to 3-star unless you want to compete in Kyuubi.

They both have advantage and disadvantages so you need to carefully decide which suits your team more before upgrading him permanently.