This is a deliberate trade-off for performance, as described in https://www.factorio.com/blog/post/fff-176
A fully compacted belt can move in Factorio, but only when Factorio knows it can output into an open belt. You can have a whole chain of fully compacted belts move, so long as the last segment has an opening. This is handled just like the first algorithm in OP - moving one segment per iteration like a big caterpillar walking.
A loop is just a segment that outputs into its own input - it has a seam. Factorio can't move the belt because it doesn't see an open space. But one could still use the second algorithm, marking segments as immobile rather than tiles. This allows the loop to work without jamming, even with the optimization.
The modern game is a lot more restrictive in terms of how items can be laid out on belts. (This is a good thing. The old behavior was often unpredictable and hard to control.)
I bought in late 2014, pre-steam. I also have a late 2013 email referencing Factorio - a RimWorld project update giving a nod to "Other interesting games you might want to check out"!
Early 2013 was the initial Indiegogo campaign. While the sprites looked much different then, many of the machines and mechanics appear to have been fundamentally in place even way back then - from robots to cars to inserters to belts.
Well worth it to get my name into the game. https://i.imgur.com/RftBXWG.png
First of all, I applaud you for squeezing that much into your life. I honestly think that's awesome.
re single Dad and Cracktorio: my wife calls it Divorcio. So I see how those go together. :)