I'm not familar with services that interact with the desktop but have written a service and had it installed/removed directly from InstallShield.  In order to do this we had to upgrde to a newer version of InstallShield 3.  Updates are available to all registered users from their FTP site in encrypted ZIP sets.  

We're currently using Installshield 3.00.107 which is one revision back from the latest release 3.00.107.  There is also a set of documents on the InstallShield home page talking about how to do various types of things with NT Services from InstallShield.

One final obvious question is are you using the 32 bit version of Installshield or are you trying to use the freebie version that came with Visual C++ V4?  If you're trying to use the version that came with VC++ there was an update to that version which is also available on their home page.

Steve