I'm not sure if I was clear. You *have* to create an automation with the client parameter set to TRUE. It won't compile otherwise in 2013 - try it out to see the message you get.
The issue at stake here is not was the automation already instantiated. I have seen this same error before in previous NAV versions:
Microsoft Dynamics NAV Business Web Services attempted to issue a client callback to create an Automation object...
I have also created it in a simple processing report to confirm that it wants to prompt for access to the automation object. These are not things I need help with, but I do appreciate the input. Troubleshooting this is 100% simple - figuring out how to get around this needless security obstacle is not.
Just to reiterate back to my OP: Does anyone know how to automatically set an automation component to always allow the creation?
We set the service to run under a user account, ran a batch process to prompt for the creation of the same component and chose "always allow", but we still get the same prompt under the context of the web service. The inclusion of this prompt is frustrating, and any help is appreciated.