Ok, lets start:
Our client follows SOA principles and
have design web services that are very
fine grained like createCustomer,
deleteCustomer, etc.
No, the client has forgotten to reach the SOA principles and put up what most people do - a molass of badly defined interfaces. For SOA principles, the clinent would have gone to a coarser interface (such asfor example the OData meachsnism to update data) or followed the advice of any book on multi tiered architecture written in like the last 25 years. SOA is just another word for what was invented with CORBA and all the mistakes SOA dudes do today where basically well known design stupidities 10 years ago with CORBA. Not that any of the people doing SOA today has ever heard of CORBA.
I am not sure if fine grained services
are desirable as they create
transactional related issues.
Only for users and platforms not supporting web services. Seriously. Naturally you get transactional issues if you - ignore transactional issues in your programming. The trick here is that people further up the food chain did not, just your client decided to ignore common knowledge (again, see my first remark on Corba).
The people designing web services were well aware of transactional issues, which is why web service specification (WS*) contains actually mechanisms for handling transactional integrity by moving commit operations up to the client calling the web service. The particular spec your client and you should read is WS-Atomic.
If you use the current technology to expose your web service (a.k.a. WCF on the MS platform, similar technologies exist in the java world) then you can expose transaction flow information to the client and let the client handle transaction demarcation. This has its own share iof problems - like clients keeping transactions open maliciously - but is still pretty much the only way to handle transactions that do get defined in the client.
As you give no platform and just mention java, I am pointing you to some MS example how that can look:
http://msdn.microsoft.com/en-us/library/ms752261.aspx
Web services, in general, are a lot more powerfull and a lot more thought out than what most people doing SOA ever think about. Most of the problems they see have been solved a long time ago. But then, SOA is just a buzz word for multi tiered architecture, but most people thinking it is the greatest thing since sliced bread just dont even know what was around 10 years ago.
As your customer I would be a lot more carefull about the performance side. Fine grained non-semantic web services like he defines are a performance hog for non-casual use because the amount of times you cross the network to ask / update small small small small stuff makes the network latency kill you. Creating an order for like 10 goods can easily take 30-40 network calls in this scenario which will really possibly take a lot of time. SOA preaches, ever since the beginning (if you ignore the ramblings of those who dont know history) to NOT use fine grained calls but to go for a coarse grained exchange of documents and / or a semantical approach, much like the OData system.