The DisplayName is used, for example, in the Service Control Manager to provide a user-readable descriptive name for the service. The DisplayName is a registry value, but is never used as a registry key. Therefore, restrictions on the ServiceName property value do not apply. ServiceName is used as the HKEY_LOCAL_MACHINES\System\CurrentControlSet\Services registry key, so it is restricted.
The display name is never used by the install utility to identify the service, so there are no restrictions on the choice of name, as there is for the ServiceName property.