I am writing a windows service that needs to be running 24/7. It is a pretty simple service that monitors a directory where files are dropped into and processes those files. I need to restart the service if an unhandled exception is thrown.
Is there a way for a service to restart itself in the event of an unhandled exception?
The Services applet has many different recovery features:

It can take different actions on the first, second, and subsequent failures:
The program that runs should be able to look in the event log and see the reason for failure (especially if you log it), and should therefore be able to disable the service if the exception is one that is not recoverable.
And, of course, in the meantime, the service should be logging what's going on, which should enable any management tool to notify Operations of what's going on.
I agree that you should probably not configure "third and subsequent" to be "restart service", or you could wind up in a loop.
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