I've confirmed that I can run the attached test batch file from an Action set whether
Blue Iris is running as a service or not.
I'm providing it because I do not know what your batch file is trying to do; this should eliminate it as the cause of the problem.
The provided batch file simply opens a self-closing message box on your desktop (next screenshot).
It contains this single line...
c:\windows\system32\msg.exe * /TIME:5 "msg.exe test message; closes in 5 seconds."
Let's test your system by adding this batch file to your desired Alert Action set using either of the following setups.
If the 1st option does not work, try the 2nd. The 2nd option opens the batch file in a minimized cmd.exe window.
Finally, if you are running as a service, make sure you are running it with your own user account (not 'Local System')...