In this question, routes from EIGRP domain are redistributed into OSPF (with tag 111) then RIPv2 but without any filtering so R5 learns all routes from both EIGRP and OSPF domain. If we only want R5 to learn routes from OSPF domain then we must filter out routes with tag 111 and permit other routes.
The line "route-map O2R permit 20" is important to allow other routes because of the implicit deny all at the end of each route-map.

The reason for the loop is that R2 is forwarding the packets destined to 10.1.1.1 to R4, instead of R1. This is because in the redistribute OSPF statement, BW metric has a higher value and delay has a value of 1. So, R2 chooses R4 over R1 for 10.1.1.0/24 subnet causing a loop. Now, R5 learns 10.1.1.0/24 from R3 and advertises the same route to R4, that R4 redistributes back in EIGRP. If R3 sets a tag of 1 while redistributing EIGRP in OSPF, and R4 denies all the OSPF routes with tag 1 while redistributing, it will not advertise 10.1.1.0/24 back into EIGRP. Hence, the loop will be broken.