Have you tried debugging the service execution step by step? We don't have your code, and our .Net Process code seems to be deprecated by Microsoft (as it worked correctly 4 or 5 years ago). If you could make us a small sample - then we could try debugging this from our side.
Also, have you tried playing with service types? From what I remember - I tried different combination before this worked.
What I see in my sample is that the account type for the service process installer should be LocalSystem.
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