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Neil,
Yes it is a service, however for testing we are running it as a tool inside ArcMap. Since I am running inside the context of ArcMap can I still get a way to gain access to IApplication?
Yes, if you are creating the tool using COM then the hook parameter passed into ICommand.OnCreate is of type IApplication, you just need to cast it and keep up with it. If you're creating an add-in then there is a global object available that will give you the reference. I don't use add-ins so I can't tell you what it's called but I'm sure it's in the documentation.
http://resources.arcgis.com/en/help/arcobjects-net/componenthelp/index.html#/AppRefClass_Class/00230...