This shouldn’t be necessary since all the traffic from/to instances happens through either:
A network bridge interface (typically lxdbr0);
OVN;
A veth interface (for p2p and routed NICs);
A physical NIC interface on the instance (for physical NIC devices);
And communication requests from other internal processes should use the LXD unix socket so it shouldn’t be necessary to configure lo. If you are having problems increasing network bandwith of LXD please feel free to show more information on the problem (the steps to reproduce the issue and info on your environment).