What should you configure for the DHCP service and the WDS service?

Both of you are right!

The Windows Deployment Services PXE server must listen on three network ports:
UDP port 67: Incoming DHCP broadcast packets from PXE-enabled clients

UDP port 68: Used by the DHCP authorization process. This is only required if DHCP authorization is enabled. (DHCP authorization is also known as PXE rogue detection)

UDP port 4011: Incoming PXE traffic directed at the server by the PXE client

The Windows Deployment Services PXE server is designed to handle four configurations regarding DHCP interaction:
The Windows Deployment Services PXE server and a Microsoft DHCP server exist on different physical computers

The Windows Deployment Services PXE server and a non-Microsoft DHCP server exist on different physical computers

The Windows Deployment Services PXE server and a Microsoft DHCP server exist on the same physical computer

The Windows Deployment Services PXE server and a non-Microsoft DHCP server exist on the same physical computer

The default installation of Windows Deployment Services handles the first two configurations. That is, the server’s networking configuration upon the initial installation will successfully bind the PXE server to listen on UDP port 67. In cases where the Windows Deployment Services server and the DHCP server are located on the same physical computer (as in the last two cases listed previously), you must perform two additional configuration steps:
The PXE server must be configured so that it does not listen on UDP port 67 (so that the port may be used by the DHCP server). A registry value, UseDHCPPorts, controls whether the PXE server listens on the DHCP port:

HKLM\System\CurrentControlSet\Services\WDSServer\Providers\WDSPXE

When set to 1, the WDS PXE server will listen on port 67. Use this setting in configurations where the Windows Deployment Services PXE server and DHCP are on different physical computers. This is the default value for the setting.

When set to 0, the PXE server will not listen on port 67. Use this setting in configurations when Windows Deployment Services and DHCP are located on the same physical computer.

DHCP Option tag 60 (set to the string PXEClient) must be added to the active DHCP scopes that service network boot computers. Configuring these options are management tasks that are not handled automatically by the Windows Deployment Services PXE server. For more information, see Chapter 10: How To Use the Management Tools.

By default the Windows Deployment Services server binds to all ports in exclusive mode. This mode reserves the port exclusively for use by Windows Deployment Services and prevents any other active services from listening on the port. There are some scenarios (particularly those that require running a DHCP server) that do not support adding custom DHCP option 60 on the same physical computer as the Windows Deployment Services server. In these circumstances, it is possible to configure the server to bind to UDP Port 67 in non-exclusive mode by passing the SO_REUSEADDR option.

For more information, see Using SO_REUSEADDR and SO_EXCLUSIVEADDRUSE (http://go.microsoft.com/fwlink/?LinkId=82387.The) registry key that contains the configuration required to have the server listen in non-exclusive mode by passing the SO_REUSEADDR flag is:

HKLM\System\CurrentControlSet\Services\WDSServer\Parameters

Name: SharedPorts

Type: REG_DWORD

Value: 0 = Not configured (do not bind using SO_REUSEADDR).

1 = Bind using SO_REUSEADDR. Warning: This option poses a potential security risk. This setting is only read on startup of the WDSServer service. Due to potential security concerns, setting this value at 1 is not recommended.

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