Question about service items for purchase. If I have a painted part, we order the raw part number from one vendor, then order the service item for purchase from another vendor, both of those items go onto a work order to get combined. How does purchasing see that they need to make the PO for that WO?

you will have two different POs as they are two different vendors, if you want to show as one you will need to receive them separately and then create Sales order or work order, if you send it out for painting then you can consider outsourced manufacturing (20.1 feature).