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If you tune the radio to a different station, does the "blocking" position of the loop tuning capacitor change, or does it turn out to be the same position? I am really grasping at straws here, but I am thinking that you might be tuning the loop to the IF frequency (455kHz) of the radio and setting up a feedback condition, that overloads the radio.
Another possibility is that the signal from the loop is exactly canceling the signal picked up by the internal loopstick of the radio... try rotating the radio or moving it away from the loop.
jr
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