I see the message with Duplicati launched as an application.
Your problems are confusing. You say first that you are waiting a long time (how long is long ? 10s ? 10’ ? 10h ?) but don’t say that it does not work. Then you say that it does not work as a service. Then you say that when running as an application it does not work because files are in use (that’s pretty much to be expected., backing up in use files is done with snapshots that are supported only when run as system / administrator).
For the record if Duplicati has a delay before displaying a file version in a restore operation, I see no reason for the delay to be different between running as a service and as an application. Delays are happening when there is a lot of files in the accessed directory, because the query is not well optimized.
Edit: you can remove the ‘error’ message by deleting/moving elsewhere the Dll. It is not used on Windows.