How do I deploy an application (system service) using Group policy?

I have a specific application which gets installed as a system service. I deployed the MSI file for a computer in a Group Policy after which I restarted the client machine. While starting up the OS (Windows XP SP2), it starts installing the service. The installation is supposed to start the service automatically after installation. This is where the issue occurs. First, it takes hell lot of time trying to install the service (about 15 mins or so). However when I login and check the Event Viewer, I can see an error message which says:

Error 1920.Service failed to start. Verify that you have sufficient privileges to start system services.

I even tried enabling the “Always install with elevated privileges” option for Windows Installer under Administrative templates. However that didnt have any effect to the installation.

Am I missing out on something?