Services are forbidden from interacting with the desktop, including displaying windows or forms. In windows 2003 and XP you could work around the issue by marking the service 'interactive' and this would allow the service to display on the user session, but as of Windows 2008 and Vista this is enforced and services can no longer interact in any fashion with the user.
When services need to display anything, the solution is to split the logic into two separate processes, one being the service and one being a normal user process. The user process runs launched by the user, in its session (it can be launched automatically at session start up) and it connects to the service via some IPC channel (shared memory, named pipes, sockets etc). The service can then display anything it wishes to the user by asking the user process half of the application to display what it needs to display.