Window Build ≥ 14393 has fixed this issue.
Through at least windows Insider Build 14372, making softlinks in WSL will loop endlessly. This true whether making a softlink from WSL to the main Windows C:\ drive or within WSL.
Example from WSL:
ln -s ~/Users . cd Users cd Users cd Users cd asdfasdfffas (a non-existent directory) pwd $HOME/Users/Users/Users/asdfasdffffas