You can use the OLEDB driver to create XLS files in a server environment.
http://support.microsoft.com/default.aspx?scid=kb%3Ben-us%3B306572

In your case you want a web services, so you would build an ASMX not an
ASPX.
But it's very similar.

Returning this xls to the client (requestor) could be done in a couple of
ways.
a. drop the generated xls file into a directory that is http-accessible. And
in the web service, return a URL to that xls file.
b. use DIME to attach the file to the web service response