My original answer was off. After some research here is the real reason and references:
It is because you started your WCF ServiceHost on the UI thread.
As anyone who has done multi-threaded UI programming in Windows knows, you can't update the UI without synchronizing back to the UI thread using something like the Control.Invoke method.
By default WCF ServiceHost handles all requests on their own threads from the threadpool. However, when you start the WCF ServiceHost on the UI thread, WCF detects that the UI thread has a SynchronizationContext associated with. WCF detects this and instead of using the threadpool to handle request it dispatches all incoming requests to the UI thread. The reasoning behind this is that this means the WCF Server component code can update the interface safely.
So even though your WCF service may not do any interaction with the UI at all WCF will use this mechanism due to being started on the UI thread.
Simple fix is to apply the ServiceBehavior attribute with UseSynchronizationContext set to false. Or start the ServiceHost on another thread (as you discovered).
Here are some more details:
http://bytes.com/topic/net/answers/750778-wcf-inproc-client-server-main-thread-client-call-hangs
http://www.softinsight.com/bnoyes/PermaLink.aspx?guid=4bea53fa-2553-4d7b-bfe2-b0f0e9d11d0a
Sorry for the original misleadings. Hope this helps.