Hi Sharan,
What you said is extremely true with the Combo-loopbacks in the simulation perspective (Infinite loop).
As FvM said, for Combo circuits, input should be glitch free otherwise un-expected results may come. What I said is not a "rule", but while optimizing design by the synthesizer "or" some designers are stick on their designs with Combo-loopback, In these cases a verification/DFT guy has to do their on alternative without affecting the functionality. Ideally speaking most of the designers will not prefer combo-loops in their design, the major draw-back of such designs are most susceptible to the DEAD_LOCK.BETTER AVOID COMBO-LOOPBACK IN DESIGNS.
-Paul