I do not know if this is possible (and if the exe is designed to be a service and interacts with the SCM, then one wonders why it was not installed as a service). But if I were trying register an existing file as a service, I would ditch the Wix\File element (which should get rid of the light error), and set the Wix/Component/@Directory to a property (which was initialized to the path of the folder the existing file is in using a search of some kind).
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