I think there are multiple ways these infinite loops can occur. It can be an inference engine bug because the engine doesn't recognize the specific format of tags/tokens the model generates to delineate the different types of tokens (thinking, tool calling, regular text). So the model might generate a "I'm done thinking" indicator but the engine ignores it and just keeps generating more "thinking" tokens.

It can also be a bug in the model weights because the model is just failing to generate the appropriate "I'm done thinking" indicator.

You can see this described in this PR https://github.com/ggml-org/llama.cpp/pull/19635

Apparently Step 3.5 Flash uses an odd format for its tags so llama.cpp just doesn't handle it correctly.