To create setup projects in Visual Studio 2012 with InstallShield Limited Edition, watch this video.
The InstallShield limited edition that cannot install services.
"ISLE is by far the worst installer option and the upgraded, read - paid for, version is cumbersome to use at best and impossible in most situations. InnoSetup, Nullsoft, Advanced, WiX, or just about any other installer is better. If you did a survey you would see that nobody is using ISLE. I don't know why you guys continue to associate with InstallShield. It damages your credibility. Any developer worth half his weight in salt knows ISLE is worthless and when you stand behind it we have to question Microsoft's judgment."
By Edward Miller (comments in Visual Studio Installer Projects Extension).
The WiX Toolset, which, while powerful is exceeding user-unfriendly and has a steep learning curve. There is even a downloadable template for installing Windows services (ref. VS2012: Installer for Windows services?).
For Visual Studio 2013, see blog post Creating installers with Visual Studio.