Hi Curtis,
Strange that connecting earth GND to an isolated 5V supply would cause a problem.
I don't think that would normally be called a ground loop as there aren't multiple ohmic connections to ground.
I'm guessing your earth ground noise is very high and is somehow being coupled into the KFLOP +5V/GND lines.
Are you getting Read Failed - Auto Disconnect Errors?
Have you checked the USB cable shield? Is it less than 1 ohm shell to shell? Does it have ferrite rings?
Do you happen to have an oscilloscope to look for noise?
Have you tried turning off components, such as the Spindle Power, to see if you can isolate a main source of noise?
You might try connecting the 5V Supply's Earth GND to some other point away from sources of noise.
Otherwise I'd suggest a USB Isolator. Even though I don't believe you have a normal ground loop issue, its always good to be isolated.