Yeah, I remember the first time a moderator asked if it was OK that he changed a user (after a request), I hadn't had a qlue that they could do that. And before that I was a bit confused when a moderator posted some stats from the forum, I didn't know that either. Back then I don't think I even knew they had an admin page at all, only that they had the post edit options. =] But I trust my moderators and already had a bunch of admins that I knew could do anything.
Maybe just a short description on the add mod privs-option telling what they will be able to do would be a good idea.