I have the following declaration of my service:
Probably you have to set the permission for the your service, something like that:
and dont forget to include the UtilExtension: xmlns:util="http://schemas.microsoft.com/wix/UtilExtension"
There is another way (but not recomended :) You could try to install it using custom actions:
The problem with this code is that you need to have the install location without the white spaces (I had a problem with white spaces and could not manage to solve it, probably you'll be more lucky).