Here's the way I see it.
When you use a VA, you impersonate the machine account.
The problem is, that it is easy to make a VA or use an existing one (ex. NT Authority\NETWORKSERVICE). If you grant the machine account access to an instance, an application that is running as a VA will be able to connect to that instance and perform actions.
With a managed account, you will have to provide the credentials for that account to whatever application wants to use them, allowing you more granularity with permissions.
I quite often have to setup MS SQL Server and wondered if anyone can
provide advice on configuring the accounts the services should run as.
IMO this has been vaguely documented by Microsoft, while they point
you in the right direction I have never been able to find any concrete
examples.
It's actually documented quite thoroughly: http://msdn.microsoft.com/en-us/library/ms143504.aspx
Is there a part of that you're not sure about?
For simple deployments\development environments it is OK to use the
virtual account defaults the installer uses: e.g. NT
SERVICE\MSSQLSERVER
This is going to depend on the environment. I, personally, hate finding a server someone setup using a local account and asking to get access to network resources some time in the future, among other issues.
For production and in domain environments it's recommended to use
either a Managed Service Account, or create a domain user account(not
an admin) for each service.
Again, depends, but generally I would agree (a counter example would be availability groups where it makes sense to use a single domain account across all instances).
Allegedly if you use a domain account at installation time the
installer will set any required permissions for you.
Unless there is a failure, etc, it will do so. I'm not sure why the "Allegedly" part.
If changing the service account on an existing install from a virtual
account to a domain account the recommendation is to use the SQL
Server configuration manager to set the new service accounts.
Allegedly this will set any required permissions for you.
When changing any of the services for SQL Server, always use SSCM. Always. Period. It will set the permissions for the new account to the basics. If before the local system account was used and unrestricted permission to everything on the system was had, I would expect something to fail permissions after the change due to tighter controlled security. That's not a SQL Server SSCM fault, that's an admin fault of not granting proper EXTRA permissions (such as accessing a network share, restricted folders, items outside of the SQL Server install purview, etc.)
I just tried changing the service account in an existing install to a
domain account and it would give me a logon failure until I granted
the account 'log on as service' permission, which contradicts the part
where the SQL Server configuration manager will set any required
permissions. (Although im not sure if a GPO may have interfered with
setting this local security policy)
Sounds like a GPO is causing an issue (IMHO). Wouldn't be the first time :)
So my question is, if you create a new domain user account for each of
the SQL Server processes what permissions should be set for each
account?
I would explicitly set any permissions outside those stated in the msdn link I have above (also given by @joeqwerty and in your OP). For example, on a "backup" folder on a network share, on a new drive added to hold new databases (where setup was already run but the drive didn't exist), etc.
But it's not clear to me if that is something I should be doing
manually for the user I create to run the service as, or whether using
the SQL config manager should automatically set these permissions.
Unless something is extremely broken with the server, these shouldn't have to be manually given.
Best Answer
Based on your description, I don't think you'll have any issues with either account type. One important consideration is whether you have any internal/corporate or external compliance requirements with regards to the service account used by databases.
Depending on the actual policy or compliance requirement, you might find explicit wordings about password management which doesn't exist with VAs. Real security impact is almost never the issue as most of these policies (that I've worked with anyway) are either really dated or written by a "general IT professional" or both. Trying to convince whoever manages these policies or the auditors has never worked for me. Just educating them on how VAs work can be an exercise in futility.
If you aren't affected by such policies/requirements and are unlikely to be in the foreseeable future then you'll be fine with VAs. Else, you're pretty much pushed down the path of MSA or some other form of human/tool managed account.