I assume the exception is occurring in one of the calls being made inside the
web service. Since the "Value cannot be null" exception is occurring on a
parameter named "path", I wonder if maybe you're missing a configuration
entry...?

Also, what steps did you use to install and configure the web service on the
SharePoint server? Depending on how you deployed the web service, you may
need to add configuration entries to a different web.config file. If you
think it's a permissions issue, check the web.config for the folder that
contains the .asmx file to make sure you've enabled impersonation and Windows
authentication and added all of the necessary configuration items.

Here's a way you can debug this on the SharePoint server:
- Make sure you have compiled your web service in Debug mode; if not,
recompile it and redeploy it to the server.
- Install and configure the Visual Studio 2005 Remote Debugger on the
SharePoint box using the VS2005 setup CD/DVD, then start the remote debugger
module.
- Open your web service project in Visual Studio and select Debug >
Attach... from the menu.
- Enter the machine name of the SharePoint server; you should get a list of
the processes running on the server.
- Ctrl-click all of the w3wp.exe processes and click the Attach button.
- Add a breakpoint at the beginning of your web service method.
- Try to add the web service connection to InfoPath; Visual Studio should
break into the debugger when InfoPath tries to execute the web service method.

You should now be able to single-step through your code to find the problem.