We also ran into this issue under Windows 7 and spent some time already looking for workarounds.
In our use case we do not actually use the Media SDK within the service, but within a process that is started by the service. There are a lot of opinions on the web whether this should be possible or not. There is a tutorial that looks promising, but we had no success with that.
So the only option might be Windows 8, what would be unfortunate because we also want to support Windows 7 and implementation wise the distinction would be a hassle.