PipeStream with Rx that works!

gistfile1.cs

using System;
using System.IO;
using System.IO.Pipes;
using System.Reactive.Concurrency;
using System.Reactive.Disposables;
using System.Reactive.Linq;
using System.Runtime.Serialization;
using System.Runtime.Serialization.Formatters.Binary;
using System.Security.AccessControl;
using System.Security.Principal;
using System.Threading;

namespace YourNameSpace
{
    public static class PipeStreamObservable
    {
        private static readonly PipeSecurity PipeSecurity;

        private static readonly ThreadLocal<BinaryFormatter> BinaryFormatter
            = new ThreadLocal<BinaryFormatter>(() => new BinaryFormatter());

        static PipeStreamObservable()
        {
            PipeSecurity = new PipeSecurity();
            PipeSecurity.AddAccessRule(
                new PipeAccessRule(WindowsIdentity.GetCurrent().User, PipeAccessRights.FullControl, AccessControlType.Allow)
            );
            PipeSecurity.AddAccessRule(
                new PipeAccessRule(
                    new SecurityIdentifier(WellKnownSidType.WorldSid, null), PipeAccessRights.ReadWrite,
                    AccessControlType.Allow
                    )
                );
        }

        public static void Write<T>(this PipeStream stream, T type)
        {
            BinaryFormatter.Value.Serialize(stream, type);
        }

        public static IObservable<T> Create<T>(out NamedPipeServerStream stream, string pipeName,
            EventHandler onConnected = null)
        {
            stream = new NamedPipeServerStream(pipeName, PipeDirection.InOut,
                -1, PipeTransmissionMode.Byte,
                PipeOptions.Asynchronous, 4096, 4096, PipeSecurity);

            var serverStream = stream;
            return Observable.Using(() => serverStream, resource => Observable.Create<T>(o =>
            {

                var currentStateSubscription = new SerialDisposable();

                return NewThreadScheduler.Default.Schedule(
                    new FormatterIterator<T>(resource, new BinaryFormatter(), onConnected), (state, self) =>
                    {
                        var observable = state.ReadNext();
                        if (observable != null)
                            currentStateSubscription.Disposable =
                                observable.Subscribe(
                                    str =>
                                        {
                                            self(state);
                                            o.OnNext(str);
                                        },
                                    ex =>
                                        {
                                            currentStateSubscription
                                                .Dispose();
                                            o.OnError(ex);
                                            resource.Close();
                                        },
                                    () =>
                                        {
                                            currentStateSubscription
                                                .Dispose();
                                            o.OnCompleted();
                                            resource.Close();
                                           
                                        });
                        else
                            o.OnError(new Exception("Scheduling aborted."));
                    }
                    );
            }));
        }

        public static IObservable<T> Create<T>(out NamedPipeClientStream stream, 
            string server, 
            string pipeName, 
            EventHandler onConnected = null)
        {
            stream = new NamedPipeClientStream(server, pipeName, PipeDirection.InOut,
                PipeOptions.Asynchronous);

            var clientStream = stream;
            return Observable.Using(() => clientStream, resource => Observable.Create<T>(o =>
            {

                var currentStateSubscription = new SerialDisposable();
           
                return NewThreadScheduler.Default.Schedule(
                    new FormatterIterator<T>(resource, new BinaryFormatter(), onConnected), (state, self) =>
                        {
                            var observable = state.ReadNext();
                            if (observable != null)
                                currentStateSubscription.Disposable =
                                    observable.Subscribe(
                                        str =>
                                            {
                                                self(state);
                                                o.OnNext(str);
                                            },
                                        ex =>
                                            {
                                                currentStateSubscription
                                                    .Dispose();
                                                o.OnError(ex);
                                                resource.Close();
                                            },
                                        () =>
                                            {
                                                currentStateSubscription
                                                    .Dispose();
                                                o.OnCompleted();
                                                resource.Close();
                                            });
                            else
                                o.OnError(new Exception("Scheduling aborted."));
                        }
                    );
            }));
        }

        private delegate bool StreamHandler<T>(Stream input, out T output);

        public interface IIterator<out T>
        {
            IObservable<T> ReadNext();
        }

        private abstract class ReaderState<T> : IIterator<T>
        {
            public abstract IObservable<T> ReadNext();
        }

        private class ReadReadyState<T> : ReaderState<T>
        {
            private readonly PipeStream _stream;
            private readonly StreamHandler<T> _handler;


            internal ReadReadyState(PipeStream stream, StreamHandler<T> handler)
            {
                _stream = stream;
                _handler = handler;
            }

            public override IObservable<T> ReadNext()
            {
                return Observable.Create<T>(o =>
                {
                    try
                    {
                        if (_stream.IsConnected)
                        {
                            T value;
                            if (_handler(_stream, out value))
                                o.OnNext(value);
                            else
                                o.OnCompleted();
                        }
                    }
                    catch (Exception e)
                    {
                        o.OnError(e);
                    }

                    return Disposable.Empty;
                });
            }
        }

        private class ServerStreamReader<T> : IIterator<T>
        {
            private ReaderState<T> _currentState;
            private readonly NamedPipeServerStream _stream;
            private readonly StreamHandler<T> _handler;

            internal ServerStreamReader(NamedPipeServerStream stream, StreamHandler<T> handler, EventHandler onConnected)
            {
                _stream = stream;
                _handler = handler;
                _currentState = new ConnectionWaitState<T>(this, onConnected);
            }

            private class ConnectionWaitState<T1> : ReaderState<T1>
            {
                private readonly ServerStreamReader<T1> _parent;
                private readonly EventHandler _onConnected;
  
                internal ConnectionWaitState(ServerStreamReader<T1> parent, EventHandler onConnected)
                {
                    _parent = parent;
                    _onConnected += onConnected;
                }

                public override IObservable<T1> ReadNext()
                {
                    try
                    {
                        _parent._stream.WaitForConnection();
                        if (_onConnected != null)
                            _onConnected(this, EventArgs.Empty);
                        _parent._currentState = new ReadReadyState<T1>(_parent._stream, _parent._handler);
                        return _parent._currentState.ReadNext();
                    }
                    catch (Exception)
                    {
                        
                    }
                    return null;
                }
            }

            public IObservable<T> ReadNext()
            {
                return _currentState.ReadNext();
            }
        }

        private class ClientStreamReader<T> : IIterator<T>
        {
            private ReaderState<T> _currentState;
            private readonly NamedPipeClientStream _stream;
            private readonly StreamHandler<T> _handler;

            internal ClientStreamReader(NamedPipeClientStream stream, StreamHandler<T> handler, EventHandler onConnected)
            {
                _stream = stream;
                _handler = handler;
                _currentState = new ConnectionWaitState<T>(this, onConnected);
            }

            private class ConnectionWaitState<T1> : ReaderState<T1>
            {
                private readonly ClientStreamReader<T1> _parent;
                private readonly EventHandler _onConnected;

                internal ConnectionWaitState(ClientStreamReader<T1> parent, EventHandler onConnected)
                {
                    _parent = parent;
                    _onConnected += onConnected;
                }

                public override IObservable<T1> ReadNext()
                {
                    try
                    {
                        _parent._stream.Connect(5000);
                        if (_onConnected != null)
                            _onConnected(this, EventArgs.Empty);
                        _parent._currentState = new ReadReadyState<T1>(_parent._stream, _parent._handler);
                        return _parent._currentState.ReadNext();
                    }
                    catch (Exception)
                    {
                    
                    }
                    return null;
                }
            }

            public IObservable<T> ReadNext()
            {
                return _currentState.ReadNext();
            }
        }

        private sealed class FormatterIterator<T> : IIterator<T>
        {
            private readonly IIterator<T> _iterator;
            private readonly IFormatter _formatter;

            public FormatterIterator(NamedPipeServerStream source, IFormatter formatter, EventHandler onConnected)
            {
                _iterator = new ServerStreamReader<T>(source, DeserializeWithFormatter, onConnected);
                _formatter = formatter;
            }

            public FormatterIterator(NamedPipeClientStream source, IFormatter formatter, EventHandler onConnected)
            {
                _iterator = new ClientStreamReader<T>(source, DeserializeWithFormatter, onConnected);
                _formatter = formatter;
            }

            public IObservable<T> ReadNext()
            {
                return _iterator.ReadNext();
            }

            private bool DeserializeWithFormatter(Stream stream, out T value)
            {
                try
                {
                    value = (T) _formatter.Deserialize(stream);
                    return true;
                }
                catch (Exception)
                {
                    value = default(T);
                    return false;
                }
            }
        } 
   }
}

gistfile2.cs

namespace YourNameSpace
{
    public interface IPipeStreamObserver<in T> : IObserver<T>
    {
        PipeStream PipeStream { get; set; }
        void OnConnected();
    }
    
    public class IpcClient<T>
    {
        public IPipeStreamObserver<T> Observer { get; set; }
        private readonly AutoResetEvent _auto = new AutoResetEvent(false);
        private readonly string _server;
        private readonly string _name;
      

        public IpcClient(string server, string name, IPipeStreamObserver<T> observer)
        {
            Observer = observer;
            _server = server;
            _name = name;
        }

        public IDisposable Create()
        {
            
            NamedPipeClientStream pipe;
            var observable = PipeStreamObservable.Create<T>(out pipe, _server,_name, (sender, args) => _auto.Set());
            Observer.PipeStream = pipe;
            observable.Subscribe(
                                Observer.OnNext,
                                ex =>
                                {
                                    Observer.OnError(ex);
                                    pipe.Close();
                                    _auto.Set();
                                },
                                () =>
                                {
                                    Observer.OnCompleted();
                                    pipe.Close();
                                });
            _auto.WaitOne();
            if (pipe.IsConnected)
                Observer.OnConnected();
            return pipe;
        }
    }
    
    public class IpcServer<T>
    {
        private bool _running;
        private readonly AutoResetEvent _auto = new AutoResetEvent(false);
        private readonly List<PipeStream> _pipes = new List<PipeStream>();
        private readonly string _name;
        private Task _task;

        public IpcServer(string name)
        {
            _name = name;
            _task = Task.Factory.StartNew(() => { });
        }

        public void IpcServerPipeCreate<TPipeStreamObserver>(Task task) 
            where TPipeStreamObserver : IPipeStreamObserver<T>, new()
        {
            
            NamedPipeServerStream pipe;
            var observable = PipeStreamObservable.Create<T>(out pipe, _name, (sender, args) => _auto.Set());

            var observer = new TPipeStreamObserver() {PipeStream = pipe};
            observable.Subscribe(
                                observer.OnNext,
                                ex =>
                                {
                                    observer.OnError(ex);
                                    pipe.Close();
                                    lock (_pipes)
                                    {
                                        _pipes.Remove(pipe);
                                    }
                                },
                                () =>
                                {
                                    observer.OnCompleted();
                                    pipe.Close();
                                    lock (_pipes)
                                    {   
                                        _pipes.Remove(pipe);
                                    }
                                });
            
            _auto.WaitOne();
            
            lock (_pipes)
            {
                if (_running)
                    _pipes.Add(pipe);
            }

            if (_running)
            {
                task.ContinueWith(IpcServerPipeCreate<TPipeStreamObserver>);
                observer.OnConnected();
            }
            else
            {
                pipe.Close();
            }

        }

        public Task Start<TPipeStreamObserver>() where TPipeStreamObserver : IPipeStreamObserver<T>, new()
        {
            _running = true;
            _task = _task.ContinueWith(IpcServerPipeCreate<TPipeStreamObserver>);
            
            return _task;
        }

        public void Stop()
        {
            _running = false;
            _task.ContinueWith(Stop);
        }

        private void Stop(Task task)
        {
            lock (_pipes)
            {
                _running = false;
                _pipes.ForEach(pipe => pipe.Close());
            }
            _auto.Set();
            for (;;)
            {
                int count;
                lock (_pipes)
                {
                    count = _pipes.Count;
                }
                if (count == 0)
                    break;
            }
        }
    }
}

Here is how it is used:

class ServerObserver : IPipeStreamObserver<string>
{

    public void OnNext(string value)
    {
        value += " World!";
        Console.WriteLine(value);

        PipeStream.Write(value);
    }

    public void OnError(Exception error)
    {

    }

    public void OnCompleted()
    {

    }

    public PipeStream PipeStream { get; set; }

    public void OnConnected()
    {

    }
}

class ClientObserver : IPipeStreamObserver<string>
{

    public void OnNext(string value)
    {
        Console.WriteLine(value);

        PipeStream.Write("Hello ");
    }

    public void OnError(Exception error)
    {
        Console.WriteLine(error);
    }

    public void OnCompleted()
    {

    }

    public PipeStream PipeStream { get; set; }

    public void OnConnected()
    {
        PipeStream.Write("Hello ");
    }
}

class Program
{

    static void Main(string[] args)
    {

        var server = new IpcServer<string>("test");

        server.Start<ServerObserver>();

        var client1 = new IpcClient<string>(".", "test", new ClientObserver()).Create();

        Console.ReadLine();
        client1.Dispose();
        Console.WriteLine("Client1 disposed!");

        var client2 = new IpcClient<string>(".", "test", new ClientObserver()).Create();

        Console.ReadLine();
        client2.Dispose();
        Console.WriteLine("Client2 disposed!");

        var client3 = new IpcClient<string>(".", "test", new ClientObserver()).Create();

        Console.ReadLine();
        client3.Dispose();
        Console.WriteLine("Client3 disposed!");

        Console.ReadLine();
        server.Stop();
        Console.WriteLine("Server stopped!");
        Console.ReadLine();
    }
}