I got the question on how I put the username and password from the service account dialog (see part 1) back into the ServiceInstall element. The way I did it was to create two properties to hold default values (at the moment I do not remember if it was necessary).

<Property Id="ACCOUNT" Value="<DOMAIN\username>"/>
<Property Id="PASSWORD" Value="<password>"/>

And then I set up the ServiceInstall element to use these properties.

<ServiceInstall Id="MyServiceInstall" Name="MyService" 
			Type="ownProcess" Account="[ACCOUNT]" 
			Password="[PASSWORD]" Start="auto" 
			ErrorControl="ignore" DisplayName="MyService" />