I've never tried to get FiddlerCore running within a Windows Service,
but I've heard rumblings that other folks have done so.
Have you configured your app to spew traffic from FiddlerCore to an
accessible location to see if it's actually seeing any traffic?
Keep in mind, of course, that FiddlerCore/Fiddler set the proxy
settings for the CURRENT user. So, don't expect to capture (by
default) traffic from an Interactive user if you're running
FiddlerCore in the service account. You'd need to manually configure
the Interactive User's proxy settings to point at the FiddlerCore
proxy port.