I have to make calls from a service within Integration server to an external web service which with a SOAP API. When the service property is changed to enable caching, I keep getting the following message “Not caching - service error”

Please help. Thanks in advance.

For cache usage, you may cross check with Developer User’s Guide at http://techcommunity.softwareag.com/ecosystem/documentation/ , by navigate into product version that you are using, such as:
Version 8.2
http://techcommunity.softwareag.com/ecosystem/documentation/webmethods/wmsuites/wmsuite8-2_ga/Developer/8-2-SP1_Developer_Users_Guide.pdf

Version 7.1
http://techcommunity.softwareag.com/ecosystem/documentation/webmethods/wmsuites/wMdoc/_webM_suite_71/Developer/Developer%207.1/webMethods%20Developer%20User's%20Guide%207.1.pdf

Browse to sub-section “Configuring a Service’s Use of Cache”, there is information for do and don’t of using cache for your services.

For example:

1. Service Caching error will occur when a “node” object is present in the pipeline. If you choose to cache your service, you cannot use a “node” object.

which also mentioned in the document:
Note: Caching is only available for data that can be written to Repository version 4.
Because nodes cannot be written to Repository version 4, they cannot be cached.

2. Not all services can be cached, refer to section “Services that You Should Not Cache”

Hope this will help you.