I don't think it's the yarn. Woolease is very popular, I've used it myself, and I haven't read any complaints about the yarn creating loops. When you discover the loop, do you have the correct number of stitches on your needle? :thinking:
It doesn't look very repairable as it is--at least in my experience. Maybe if you had a picture of how it looked when you first discovered it, someone would recognize what it is. It's possible that you accidentally wrapped your yarn twice around the needle.