It knows where your mysql is, it knew where mine was. From the xampp-control.log
10:29:38 PM [mysql] MySQL Service detected with wrong path
10:29:38 PM [mysql] Found Path: C:\mysql\bin\mysqld MySQL
10:29:38 PM [mysql] Expected Path: c:\xampp\mysql\bin\mysqld.exe --defaults-file=c:\xampp\mysql\bin\my.ini mysql
Looking at the source with my very limited pascal knowledge it queries the services API in Windows (line 67) and compares the path returned to what it should be in xampp (line 74). If the compare fails, it errors. It will only install the mysql service if mysql exists in the xampp folder (line 173) also. Source file
It is a proprietary thing and will not work for anything other than what it was made for, Xampp. It's understandable.
You could uninstall your mysql service, move your mysql to \xampp\mysql, reinstall service.
It should work then but I make no promises.