I would take that to mean I should knit in the front of the stitch, the back of the stitch and the front again before taking the center stitch off the left needle. It is a double increase. Does that make sense?
I'm not sure why you would get a loop but it is basically like doing the knit front and back, but doing another stitch in the front. I grabbed some yarn and needles and did the pattern as you wrote it in your first message. The first pic shows the first stitch knit into the front, the second one shows the stitch knit into the back, the 3rd one shows the second knit into the front, the 4th pic shows what it looked like when I took the stitch off the left needle after knitting the 3 into it. Then I took a pic of the completed 3 rows, and then a close up of the increase area in the the middle. I hope these help a bit!