I want to share a SQL Server in a hosted environment, for Sharepoint and other software, using SQL Server.
Should I install one instance of SQL Server for each customer, or are there other options to consider?
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Yes, you can. With all the overhad and no sensible coordination.
Do not provide sa / admin roles for tenants, but a UI that then creates databases, users etc.
Thousands of hosters do that, so you can too.
Higher editions of SQ LServer have a ressoruce governor that can avoid that one tenant swallows up the complete resources of a server.
Get used to by a real server with a lot of discs.