Getting a Service to Run Inside of an Azure Worker Role
I think the root of your problem is that you basically can't install a service programmatically in Azure roles. You need to use a .cmd startup script and the InstallUtil to properly install the service then you can start it from the script or from your code (think from the script is often preferred for order-of-execution reasons).
Here's a blog post on how to do it: http://blogs.msdn.com/b/golive/archive/2011/02/11/installing-a-windows-service-in-a-worker-role.aspx
Here's another blog post that takes a little different approach (creating a .Net app that executes the installation, but again as part of the startup script): http://www.bondigeek.com/blog/2011/03/25/runninginstalling-a-windows-service-in-an-azure-web-role/
Hope that helps