mssql user priveleges

[Brangwyn]

Do I understand this correctly, that you can't create an SQL Server login with DBO permissions on a database?

Correct.

If that's true, how is a user supposed to create their database, tables, fields, etc? Only database owners can do that as far as I know.

dbo role permissions are not required to create databases, sufficient access is granted in other roles that allows the user to create/edit/manage their database. The Login created by H-Sphere is the "database owner" but it does not have priviledges in the "dbo" role.

Surely if you have a client and you give them SQL server space for a database, they want DBO access to it.

No, I think your confusing database ownership with the built in "dbo security role"

Question 2 - when you set up a client, do you just assign SQL database space in MB, or can you also restrict the *number* of databases they can create?

You would normally do two things, you set the MB Space in the plan, and then use the "max resources" settings of the plan to define the maximum number of databases they can create.