OMFG... I figured this out.. after god knows how many hours.
I am on XP SP2. Everything would install perfectly fine, but the ScpService would not run. It would start, but windows said immediately stopped. I have been going nuts trying to figure it out or go around it.
And of course the solution goes back to where I started.
Scarlet mentioned running the service from a command prompt or something else and being an old DOS lover (and therefore a control freak, which I'll come back to) I went with the command prompt. It would never work. Saying it could not be started and did not report an error. From there I started my quest.
Trying to use ScpServer.exe, trying to reinstall things in a different order, etc. Until I came back to the command prompt for no real reason. The last message it gave was to type NET HELPMSG 3534, which I did before and nothing happened. But.. this time I googled it and the first page I see says:
"
in my case, this was permissions on a log file, that i had to delete so the service could rewrite them with the proper permissions. But to find this, i looked at the event log which pointed me to this issue.
"
Which I of course did... only to see it didn't do anything. Another error. Remember the control freak? Well, it so happens I always streamline windows services and get rid of the fluff. As soon as I started Event Log.. bam. Driver balloon pops up, XBOX 360 for Windows installed, Sixaxis working