Is there any good example of how application service installed via MSI and independent of any user-context handling the problem of silent auto-update/on-demand update. How will the service have admin privileges to do silent update since without admin privileges modifying system files and resources is difficult. Is there any windows service which achieves the above thing ? What about Antiviruses ?
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Most applications that get updates via Windows service have that service running under the SYSTEM account, thus with full privileges. Otherwise, there is no point to use a service.
So, the main requirement is that your setup is installed by a user with admin credentials, so it can install per-machine resources, like a service.
Here is a tutorial where we explain how this is done for setup packages created with Advanced Installer. Also, you might want to read the following article to learn more about how the auto-updater works.
Disclaimer: I work on the team building Advanced Installer

Bogdan Mitrache
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Does a service under System account has same privileges as of a normal service when added to local administrator group ? If no what is the difference and what method is preferred - creating a normal service for update and adding to local admin group or creating the update service under system account ? – Maze runner Feb 01 '22 at 11:02