I don't know what exactly was meant by "completely broken," but I can hazard a decent guess.
The last time I was working with the loop encryption I managed to really screw up my system. The kernel got into an internal loop, causing the process to go into an uninterruptable sleep. This then caused all kinds of problems and made me unable to unmount the filesystem. I don't remember, but I don't think it would sync either.
I managed to do that by creating a file, pointing a loop device at it, mounting it encrypted, making a filesystem, then mounting another encrypted filesystem under that.
"Don't do that." :)