The Chilkat .NET DLL must be installed in the Global Assembly Cache (GAC) for Windows Services. (This is not a requirement for non-Service applications or ASP.NET applications — it is only a requirement for Services.)
To install an assembly in the GAC, open the Windows Control Panel, then open the Administrative Tools and run the "Microsoft .NET Framework 2.0 Configuration" Tool.
Update: Apparently some Chilkat customers *are* able to use ChilkatDotNet2.dll from a Windows Service without it being in the GAC. Putting it in the GAC solved a problem for multiple customers, so I assumed (incorrectly) that it was required…
I’ll have to do a little more research on it..
In any case, if the .NET runtime has trouble loading an assembly from a Windows Service, one thing to try is putting it in the GAC.