WCF over MSMQ can be difficult to setup. There are just too many layers. Frankly, in my opinion, it would be easier to implement fail over mechanisms without so may layers. Without all these extra layers, the chances of failures would be reduced, and the need for fail over is smaller at the first place.
When MSMQ throws an exception, the WCF host goes into a faulted state. You must handle the "Faulted" event of the service host in order to get any information on the fault. Without such an event handler, the service host just sits there quietly, as if there is nothing wrong. It will not handle any messages, and it will not give you any indication whatsoever that something is wrong.
Even if you do handle this event, there is little can be learned other than the service host entered faulted state. If you are lucky and you are in a debugger, you will see the exception that MSMQ threw, otherwise there is no way to retrieve the exception, especially if the service host runs in a service application.
One common MSMQ exception is that "An error occurred while receiving a message from the queue: The transaction specified cannot be imported. (-1072824242, 0xc00e004e). Ensure that MSMQ is installed and running. Make sure the queue is available to receive from." The error code is MQ_ERROR_TRANSACTION_IMPORT (0xC00E004E), which typically means that the transaction coordinator is not available. It turns out that you would have to allow MSDTC on the service host machine to access the network if the queue is not local.
Turning on network access for MSDTC requires the use of some tools. They are hidden at some not-so-obvious places: you would have to run dcomcnfg, open "Component Services". In some versions of Windows "Component Services" is on the "Administrative Tools" menu, but in some other versions, it is not.
Once you have found "Component Services", you need to go to the properties dialog box of "My Computer". On the "MSDTC" tab, check "Use local coordinator".
We are not done. Under "My Computer" in "Component Services", go to "Distributed Transaction Coordinator", "Local DTC", and go to its properties dialog box. Go to the security tab, and check "Network DTC Access".
All this is too complicated to maintain for a simple WCF service, not to mention the security implications. If you really love MSMQ so much that you have to have it, then this would get it to work. But WCF can work with simpler protocols. These simpler protocols are more reliable and more secure. After all, what MSMQ does is simple, we can live without it.