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I think you would be better off using a separate thread instead of a service. Have the executing thread report any progress to the Windows Form. You may also want to put some type of an adjustable processing value on the Windows Form so that the user has the ability to ratchet the processing...

I you use MSDE 2000 you might fill the database if you save too many images. There is a limit of 2GB per database. The new version of SQL 2005 allows for 4GB I think. I wouldn't worry about the size of the database too much if you are using SQL Server Standard or Enterprise and have a good...