HELP with VCenter Server 4.0 - Windows 2008 R2 64

[mikem_nj]

I have been troubleshooting an issue with my applicaiton service for several weeks now with no resolution.

Client is running VMWare Vcenter server and vsphere 4.0.

The VM machine is using Windows 2008 R2 64 bit.

Upon startup my applicaiton service creates a dump log which records the startup processes.  In general, it connects to a database in SQL 2008 R2, connects to a data feed, etc.

Upon initial startup, if the dump log does not exist, the service creates the log.  Everytime this happens, the service fails to start with error 1067.

The only way to get the service to start, is to VIEW the properties of the dump log.  I do not have to change or add anything, i just have to VIEW the properites of teh file, and then the service will start.

Is there somethign in VM setup, or security, that could be causing this?  this does not happen on physical installation, only the VM installation.

Any help or troubleshooting ideas are greatly welcomed!!!

[mikem_nj]

MORE INFO -

The service application is 32 bit, so not sure if the useage of system32 and syswow64 in the VM environment is part of the issue. 

[mikem_nj]

ONE NOTE -

When i run PROCSSMONITOR.exe from sysinternals, to try to capture what the fail point is, the service starts without issue.  So i cano not even capture what is failing.

When i stop processmonitor.exe, the service fails, until i view the properties.

Is anyone familiar with processmonitor, and what it could potentially be doing to bandage this problem while it is capturing process logs?