The name space can contain loops. Du and a few others try to detect that, using Qids, to avoid being annoying, but the loops are there.Open (and chdir etc) do indeed record the name used to open the file, and that helps
resolve the ".." problem (now done slightly differently from the paper, I think, but I'm not certain),
but that name won't have loops because it's a finite string interpreted from left to right.
You can easily build a looped space to test it:
mkdir /tmp/y
mkdir /tmp/y/z
bind /tmp /tmp/y/z
# have fun