I think the interpretation is that you cannot apply to remain until you have left the Services - which is incorrect. At the 4 year point (used to be 5) you can apply for indefinite leave to remain and commence the naturalisation process if you wish - irrespective of your job! No one from UKBA is going to say 'Soz, can't grant you citizenship cos' you is still in the Army'.
However, once you have left the services there is a time limitation on applying - again, common across all propsective applicants.