.Net service cannot be Enveloped with the protection types “Windows Shell only ” or “Method Level + Windows Shell”. The .Net service shall be protected using “Method Level” protection only.
After protecting the application binary with “Windows Shell or “Method level + Windows shell” protection type, the executable is no longer a .net binary. Hence InstallUtil (http://msdn.microsoft.com/en-us/library/50614e95.aspx) fails to register it.
So we recommend to protect application using method level only.