How do I grant users the ability to install windows services?
Solution 1:
Delegated permission to install services is going to be a little bit tough. There is a "SC_MANAGER_CREATE_SERVICE" right that can be granted to users on the service control manager (SCM) object in the global object manager.
In Windows versions up to Windows Server 2003, the rights could not be changed on the SCM. Starting in W2K3 SP1, you could change the rights on the SCM.
The API to change the security is SetServiceObjectSecurity, and more information is available here: http://msdn.microsoft.com/en-us/library/aa379589(VS.85).aspx
Some more reference re: the rights that can be granted to the SCM and the default DACL set on the SCM is available here: http://msdn.microsoft.com/en-us/library/ms685981(VS.85).aspx
In short, there's no way to do this w/o writing code. There's no magic registry setting, etc. If you can get somebody to write the code for you, though, it's totally feasible.
Solution 2:
I think the bigger problem is letting the dev team access a server they don't administer. Rather than trying to grant the rights to the users (SC_MANAGER_CREATE_SERVICE) think really hard about giving them their own box- even just a VM to test on, once they say it's ready an actual admin should install the services into the production system.