Android does not have access to /dev/loop, is this issue still valid?

It is valid, xfstests is ran from chromeos, not withing ARC.

in a chromeos root shell, xfstests fail mounting the test image:
/bin/mount -t ext4 -o context=system_u:object_r:nfs_t:s0 /dev/loop9 /tmp/test

[58785.056125] EXT4-fs (loop9): mounted filesystem with ordered data mode. Opts: 
[58785.056157] SELinux: security_context_to_sid(system_u:object_r:nfs_t:s0) failed for (dev loop9, type ext4) errno=-22

xfstest is adding the option just for selinux:

in /usr/local/xfstests/common/config

# SELinux adds extra xattrs which can mess up our expected output.
# So, mount with a context, and they won't be created
# # nfs_t is a "liberal" context so we can use it.
if [ -x /usr/sbin/selinuxenabled ] && /usr/sbin/selinuxenabled; then
        SELINUX_MOUNT_OPTIONS="-o context=system_u:object_r:nfs_t:s0"
        export SELINUX_MOUNT_OPTIONS
fi

I am guessing system_u or nfs_t are not defined, making this rule invalid.

outside of container selinux is permissive, so skipping selinux mount options might be one possible way forward?
(though I guess it's also trying to excercise selinux functionality?)

Gwendal has a fix in xfs that is being reviewed.

Change: https://chromium-review.googlesource.com/#/c/424372/