Lot of customers wanted us to support network service as the service account for TFS. Some people said it was not secure enough and therefore we should not support it. The challenge we face is balancing between simplicity vs. security. Lot of customers feel Network service is pretty safe and is better because it need less maintenance. You can secure the environment using other techniques and having domain accounts for every service is too cumbersome. Following is a link to a security guidance document I found on MSDN. The document is very well written and provides very valuable information. Following is the explanation around Network service account from the document
Network Service account
The Network Service account is a special built-in account that has reduced privileges similar to an authenticated user account. This limited access helps safeguard the computer if an attacker compromises individual services or processes. A service that runs as the Network Service account accesses network resources using the credentials of the computer account in the same manner as a Local System service does. The actual name of the account is NT AUTHORITY\NetworkService, and it does not have a password that an administrator needs to manage.
Having given you the background let me hash out what we support in Orcas. In Orcas we accept 3 different accounts while setting up TFS.
We only support running TFS Service as Network Service. You cannot use network service for Reporting data sources or WSS services. The reason in both cases is security. In case of reporting data sources if you use network service suddenly every report will have access to all the data in SQL Server and therefore it is a huge risk. Similarly WSS does not allow you to use network service.
You atleast don't have to worry about changing TFS service account password every few months. J
Note: You can use the same domain account for TFS Service, Reporting data sources and WSS installation.