I ran into this with a v9 SR7 in place upgrade. The service worked fine in the browser, there was no firewall issue (tried different ports) and the service account had local administrator rights. The previous install used a local, not a domain service account, so I wanted to stay with that.
The install in place ran without errors but the services would not communicate.
An uninstall followed by an install also failed with the same symptoms (and look out for Windows 2008 removing the group permissions on the service account with little warning).
What worked was an install with a domain account that had local admin rights on the computer. I suspect either a full install or upgrade-in-place would have succeeded.
Note that this was v9.
The localhost option made no difference (nor any of the other suggestions I found in community, though some of the suggestions have worked previously for me at other sites).