Audrey commented on my last post and diagnosed the problem as the knit being stretched as it went through the serger and then rebounding afterward (thanks Audrey and yes, Diana Couture is the French version of the German Diana Moden). I had also done some searching on the internet for anyone discussing the same problem and as a result joined the Babylock serger group on Yahoo where I found I wasn't alone with my loopy problem. The solution to "serger loops that fall off the edge of the fabric" is to simply set the differential feed. That's it! Just by moving one notch into the "compress" direction of the differential feed, my loopy problems were solved and the stitch is just about perfect. I guess when I think of using the differential feed it's for obvious things like serging the cross-grain of a knit where it's very stretchy or going the other direction with the differential feed to intentionally make lettuce edge finishes.
On my Babylock Evolvé there's a lever that is set to "A" for wide overlock and "B" for narrow. An additional "fix" for the loop problem is to use a wide overlock but set the lever to "B". Apparently this lever controls the rate at which thread is let into the stitch. So it makes sense that a narrow stitch has less thread coming into it and I can see where using "B" for a wide stitch might help if the differential feed setting isn't enough. In my case I didn't even have to make this adjustment. My loopy problem was solved with just a simple change of the differential feed by one notch.
Last night I serged up the seams to the bolero top so all that's left is to cut out and stitch on the binding. Then it's on to the next project.