Just wondering.. what should I do if the loop-back test fails?
Replace parts of the USB-to-Serial path to see if you can find the faulty component:
Settings. Did you pick the right Serial port in the Arduino app?
Driver. Do you have the latest driver for the USB-to-Serial hardware.
Port. Try a different USB port on your PC.
Cable. Try a different USB cable.
Arduino error. Your board may have an open or shorted connection. Check the pins for solder bridges.
Converter. What is converting USB to Serial? For the new Arduino UNO this may be an ATmega chip. That chip runs USB-to-Serial firmware that may have failed. Try using DFU (Direct Firmware Update) to upload fresh firmware.