I made both of the above. I started with services, but problems with AppFabric, debugging, simultaneous support for http and https, etc. They made me switch to hosting workflow in IIS (or the application server will work) and use web services for the interface.
Going along this route was also very difficult, because none of the included components of the workflow hosting had sufficient corporate functions, and I had to code them all. This is NOT easy to do, and I don't think I recommend it.
And finally, Maurice is the only true expert I found for WF4 outside of Microsoft (where I work now, but didn’t when I did this project).
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