Edited Response After Testing This Issue.
If you installed XAMPP using the portable USB feature in the setup_xampp.bat file then it is not possible to use MySQL as a service as the referenced php.ini file would require a drive letter to be assigned to the paths.
Try running the setup_xampp.bat file again and make sure you have a non portable installation of XAMPP configured.
When you tick the Svc box to install MySQL as a service then it may not be possible to start it manually see above, just tested it and I get the same result as you on a portable USB installation.
To test if MySQL is indeed running go to http://localhost/phpmyadmin
If it has started you will get the phpMyAdmin GUI.
If it can't start then you will get an error message trying to start phpMyAdmin.
My question is do you really want MySQL to start up automatically when Windows starts on a portable installation as it defeats the purpose with a drive letter having to be assigned for a Windows service?
I find starting Apache and MySQL manually when I need them running is safer for my development needs and works every time.
Good luck and best wishes.