Since 0.14.1, you can now do nlargest and nsmallest on a groupby object:
In [23]: df.groupby('id')['value'].nlargest(2)
Out[23]:
id
1 2 3
1 2
2 6 4
5 3
3 7 1
4 8 1
dtype: int64
There's a slight weirdness that you get the original index in there as well, but this might be really useful depending on what your original index was.
If you're not interested in it, you can do .reset_index(level=1, drop=True) to get rid of it altogether.
(Note: From 0.17.1 you'll be able to do this on a DataFrameGroupBy too but for now it only works with Series and SeriesGroupBy.)