First question: Is there a way to allow space administrators to create and manage their own groups with Confluence?
Second question: If not can they add or remove people from different groups that Confluence administrators create?
We have been using this plugin for a long time very successfully: https://marketplace.atlassian.com/133
It lets space admins create and edit groups, but they are prefixed with the space key. This is useful when you have a bunch of spaces that should all have the same permissions.
I'm sorry to say that isn't possible because that's not the function of a Space Admin. They're intended role is for managing the content of Spaces, but the ability to add or remove people from groups could easily be abused. For that reason those permissions are reserved for the next level of permissions, which is the Administrators who manage groups, users, backups etc. Then, finally, you have the System Administrators in the confluence-administrators group who are the super-users that have access to every component of the application.
If you want to give your Space Admins a bit more control over who has access to the spaces they manage, you might find the Community Bubbles plugin from Adaptavist will do that but it's only compatible with Confluence upto v4.0.5: https://marketplace.atlassian.com/plugins/com.adaptavist.confluence.bubbles
All the best,
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