You put everything in the same thread. You can't have a client and a server on the same thread, at least not in this kind of code.

If you do this instead, for example:

    ThreadPool.QueueUserWorkItem(state =>
    {
        var clientBinding = new NetTcpBinding();
        var testProxy = new TestProxy(clientBinding, new EndpointAddress(baseAddress));
        testProxy.Test();
    });

your code should work better.

PS: even on the same machine you can have firewall problems - well, that's a feature, not a problem :-).