I'm not familiar with SMF, but it's possible that it may restrict users to a whitelisted subset of "known safe" PHP commands, in which case it could be secure, if done correctly and rigorously. If not, then Chris's answer is pretty accurate: Allowing untrusted users to install and execute arbitrary code (PHP or otherwise) is security suicide.
As for the actual question of limiting access to various paths, it would be possible to arrange something like that using some combination of Apache suexec, selinux ACLs, and/or chroot, but you'd really have to know what you're doing in order to give enough access to be functional without also giving enough access to be trivially exploitable. If you're asking the question here, I'm going to assume that your sysadmin skills aren't up to the task, so I'll second Chris's recommendation to leave it to the professionals at the hosting companies.