C++: Implementing Named Pipes using the Win32 API
You must use CreateNamedPipe() to create the server end of a named pipe. Be sure to specify a non-zero buffer size, zero (documented by MSDN as 'use system default buffer size') doesn't work. MSDN has decent samples for a multi-threaded client&server.
A named pipe client can open the named pipe with CreateFile -- but the named pipe server needs to use CreateNamedPipe to create the named pipe. After it's created the named pipe, the server uses ConnectNamedPipe to wait for a client to connect. Only after the client has connected should the server do a blocking read like your call to ReadFile.