From a security perspective this philosophy has changed greatly. Even those of us who used to recommend running as a full-blown administrator do not any longer. Too many issues you can't resolve. Best practice says to run with the minimum rights necessary (basically carrying the Principle of Least Privilege over to the service account). I'll take my lumps jumping through hoops with monitoring, etc. but it's better than someone owning SQL Server and adding themselves to the local Administrators group using xp_cmdshell (one example).

And yes, the service account will need a login to SQL Server and will need to be a member of the sysadmin role.

In Books Online: Installing SQL Server >> Overview of Installing SQL Server >> Setting up Windows Services accounts.