I have the EXACT same issue.. I just installed LSDS and installed the service and I get the same error message.. did you ever find the fix??
You'll probably have better luck using the service wrapper for your particular app container. E.g. if you're using JBoss, create the service using tomcat6w.exe.
http://tomcat.apache.org/tomcat-6.0-doc/windows-service-howto.html