Say I install software package A which says I must reboot to finish the install. I also need to install package B which will also require a reboot. Is it advisable to reboot after installing A and before installing B?
It shouldn't be necessary to reboot between the two installations, unless there is a dependency in the first installation (.dll, config file, et al) that is required as part of the second package's installer, or if the second package requires services from the first package to be running.
Kind of a terse response, but that's essentially the crux of it.
I've never had any problem installing multiple items, as long as there were no dependencies. However, Windows Update sometimes requires you to reboot before installing updates, if you've previously installed other software.
A lot of apps, like 7-Zip or Firefox, don't require a reboot at all.
That said, if you install a major update (like a service pack or motherboard drivers) or a software package that installs one or more system services, you probably should still reboot before trying to install anything else.
Basically it is the way JMD said.
As for a concrete recommendation: better safe than sorry. I always reboot in between, preferring a few lost minutes to a maybe much longer time of "suffering" afterwards, especially because it may not be clear that there are problems immediately after the reboot.
You have to be aware of any dependencies among the two setup packages. Rebooting is the best practice otherwise.