NO! Your SharePoint Farm Account does NOT need local admin privileges. So don't give it them! (UNLESS…)
Technically this blog entry is right, HOWEVER if you use that same account to administrate the farm, it needs to be admin on the servers in order to extend a Web Application. Certain services and operations require admin rights as a comment mentioned not seeing. If you don’t have an account with those privileges then you won’t be able to manage the services or IIS sites (not to mention the two other issues in the snippet below). To save headaches people just usually make that account admin. For the tightest security you would follow the guidance below. However if you make the account admin does not mean that the install is inherently insecure either.
Easily the most irritating element of mis-configuration in a SharePoint 2007 farm is the assignment of local admin privileges (for each box in the farm) to the account used for connections to the configuration database and as the identity of the application pool hosting Central Administration (commonly referred to as the 'farm account'.
THIS IS NOT A REQUIREMENT!! THIS IS NOT A REQUIREMENT!!
Your farm account can be a regular domain user, no special requirements at all. The SharePoint Configuration Wizard will assign ALL the required privileges automatically (which the exception of DCOM activation as detailed here, and the issue with %windir%\Tasks).
NO! Your SharePoint Farm Account does NOT need local admin privileges. So don't give it them!