How to create a web service in C# that uses WS-Security for encryption and signatures for both sides (requests and responses)?
Client and server will use certificate
Not sure which version of the framework you're using, but if it's .NET 2.0 (not using WCF) check out Web Service Extensions 3.0.
That will allow you to implement the WS-Security standards in .NET 2.0 Web Services.
And if you're using WCF, take a look at this article to get some ideas on how to secure your services using the WS-Security standards.