I found one really good thing about the Service Rifle. It has a pretty large clip, and fast reload. So if you're running low on ammo for heavier guns, you can feel free to real-time unload with it. It's crap in VATS though. In fact, I did better with the 9mm in VATS, just because I could fire more rounds for my AP.
But yeah, its damage is far too weak to be truly useful. I put some AP in it, and shot a radscorpion. Had the DT symbol come up and switched immediately to my lever-action shotgun. Shotgun Surgeon let that thing blow clean through. I'm still trying to figure out something other than the Incinerator that handles Giant Radscorpions readily and doesn't involve bombs.
Maybe an explosives/grenade rifle character is a good idea...