I think the problem you have with looping is actually a Cheapo problem as well. I've noticed from the very first time I start using Cheapo that whenever it reaches a loop point, it almost invariably always makes a gap of silence, even if you set the MIDI such that the loop point should transition with no gaps back to the beginning. This happens on practically every MIDI including the ones included in default.sty, so it seems to be a Cheapo issue rather than problems in individual MIDIs.
It also doesn't help that Cheapo tends to not correctly played back notes at the very beginning of the MIDI, so the traditional fix is to insert a short gap of silence (about 1/4 of a second or so) at the very beginning. But this only exasperates the problem with looping.
I'll have to investigate further to see whether it just so happens that all the MIDIs Cheapo uses have gaps at the beginning or end, or whether instead it really is an issue in Cheapo (I suspect the latter). The way to get around it is to make sure you end the MIDI with either a true, musical ending, or to do a fade-out style ending, so that the gap of silence between looping is not noticeable. (Some of the MIDIs included in the default style seems to do this.)