i’ve come across this problem a number of times when looking at newer firmware for my router running dd-wrt. the upgrade works flawlessly but loopback doesn’t work. i finally decided to see if there was a solution out there and lucky for me, there is. a google search brought me to this bug report. there is also a dd-wrt forum topic on this as well but the solution is pretty simple. just in case the bug report and forum post both disappear, here is the solution:

Save the following commands to the Firewall Script on the Administration -> Commands page to fix loopback.

insmod ipt_mark
insmod xt_mark

iptables -t mangle -A PREROUTING -i ! `get_wanface` -d `nvram get wan_ipaddr` -j MARK --set-mark 0xd001
iptables -t nat -A POSTROUTING -m mark --mark 0xd001 -j MASQUERADE

once you have added these commands to the Firewall command list, you will need to perform a reboot and that should make the fix active.

a huge thanks to phuzi0n for providing this workaround! from the number of people who have commented, i can definitely see that i am not alone in wanting loopback to work properly but at least this workaround does the job.