I'm doing research into building a lamp server in ubuntu or debian for an intranet. Pretty much everything I have seen recommends building from source, chrooting all the components and such for security and the most up to date versions of everything. For the specific packages (apache,mysql,php) would I be better off to just stick with the debian/ubuntu packages instead? The client is pretty hardcore into microsoft products and this is the first attempt at using linux in a big way at this company so I want to be able to present something very solid to the management.
I'd say just install the default packages from your distribution. If you want to chroot your apache installation, you can install the mod_chroot package. In Debian/Ubuntu, that would be
As far as being up-to-date, just make sure to be using a supported version of the OS (e.g. Debian Lenny or Ubuntu Hardy LTS), to have the security repositories activated in your sources.list and to update your packages on a regular basis.
If your client is a Microsoft fanboy, he's surely not used to building things from source and it shouldn't shock him to use already packaged products. If you build from source, just know that you will have to follow security advisories yourself, and patch and rebuild the software every time it happens, instead of just upgrading the packages.
I know there's a lot of 'security' freaks around who say you should build everything from source, put everything in chroots and lock your computer in a bank safe. The main problem I see with this is that it won't necessarily increase your security, but it will certainly make it very hard to administrate (just explained why in the previous paragraph) and in the end it will end up less secure than using standard packages and keeping them up-to-date with a sound configuration.
It's almost always better to use the packages from the distribution.