I get this question a lot from web developers, and would like to have a short concise answer for them ...
Why do I need ArcGIS Server just to host ArcObjects in a web service?
Geographic Information Systems Stack Exchange is a question and answer site for cartographers, geographers and GIS professionals. It only takes a minute to sign up.Sign up to join this community
You can use the ArcObjects SDK to build your own services without a problem on a server as long as you have a appropriate license. I have a number of services we use that do not use the SOC/SOM services in AGS but are still ArcObjects consumers.
The reason you need AGS is a license issue; you are right you could use the ArcEngine runtime to do what you need but that is not acceptable.