Some boundary scan devices do not support the LOOP command, which is why it's giving the syntax error. This LOOP command is a Lattice-specific SVF command. It's not defined in the Serial Vector Format Specification.
The advantage of the LOOP command is that it takes much less time since user can poll and not just wait for a fixed 'worst case' finish time. For example, even if an erase takes something like 5 seconds, the command takes a fixed 85 seconds, so all the operations will be much much slower. Even something like programming, which normally might take a few milliseconds, would take 10 seconds.
In general, Lattice is working with companies to support this syntax. However, if it's not currently supported, then the user can click the [Advanced] button and check the 'Write Rev D Standard SVF file' box when generating SVF file from ispVM. This will produce a standard but slow SVF file which will work with the user's boundary scan devices.