How to prevent user from logon of an account used for impersonation only? [C#]

Currently I have a windows service written in C# (running as LocalSystem) which creates a user account, needed for impersonation, by using the DirectoryEntry to add the user/password and associated UserFlags. Then it simply uses this account to perform some tasks (using impersonation) using the LogonUser() functionality - works perfectly.

However this account should ONLY be used for impersonation by my service, a user should NEVER be able to login (even if he has the credentials) locally or via the network. To accomplish this I tried setting the Local Policies for “Deny logon locally” and “Deny access to this computer from the network” and added the user my service creates. Now however impersonation fails with the following:
Logon failure: the user has not been granted the requested logon type at this computer (1385)

So, I guess this is NOT the right way to do it … but I need to secure lockdown the account so it can only be used by my service for impersonation purposes and to ensure that no one else can ever logon to the account (even if they have all the credentials).

Is there something in LSA I can use? Or using the DirectoryEntry code similar to when the account was created? Is there a way to allow for an account to exist but not allow users to interactively logon?

Any help would be much appreciated.
Thanks,

Could you not use the System account for your service?

Wish I could .... but I need to use the user account created.