2cp from the SSoM treasury...
It looks like the Infinite AoO loop is possible, given the rules, but doesn't seem tactically sound. for example: Person "A" comes at person "B" with an attempt to Disarm without the improved Disarm feat. "B" can take a regular Melee attack, with no AoO, or a special Melee attack, wich provokes one. For our argument, we'll say "B" comes back with a special attack: Disarm of his own. He doesn't have Improved Disarm either, so the Per. "A" now has an AoO and the choice of regular melee, or special melee (and provoking the AoO). At this point, Person "A" has an advantage: If he takes a straight melee attack, And it would be at his highest BAB since it's an AoO and a good chance to hit, He gets to 1) Do Damage to Person "B", never a bad choice, 2) Cancel player "B's" Disarm (since he did damage with his AoO). And since player "B" didn't do any damage with his AoO, 3) Player "A" gets to resolve his Disarm normally.
It seems to me that in most cases one person will be at an advantage to break the chain. There may be some odd scenarios where that isn't the case, but here at work I can't come up with any.
Aethramyr.
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Unrelated, disarm does appear to be a little wierd in chain AoO's. Fred tries to disarm orc1, and as an AoO Orc1 tries to disarm Fred. Fred desides to keep the chain going and spends his AoO as a disarm. Orc1 gets bored of the whole thing, and Bonks fred with his weapon, with no return AoO.
Now to go through the stack: Fred's 2nd Disarm, from the AoO, is canceled, as he took damage. Orc1's disarm goes off, and with lucky roll for orc1, Fred is disarmed. Orc1 looks smug until he realizes he didn't do damage to Fred when he did his disarm attempt, and therefore, Fred still gets to resolve his origonal disarm attempt. Even through fred is now unarmed, his disarm attempt already provoked the AoO, and Orc1 doesn't get a new one. A wounded Fred gets a Lucky roll, and sucessfully disarms Orc1. And, since Fred wasn't holding anything when he made his disarm attempt, Fred now holds Orc1's weapon in his hands...