There is a preference in Cubase that adds Sends to newly created tracks.
When you already have an FX Channel and add a Group Track, with this preference turned on, the Group Track will automatically get a Send to your FX Channel. This Send is what prevents you from routing the FX Channel to the Group Track since it might create a feedback loop.
To solve the issue, simply remove the Send from the Group Track.
You could also consider disabling the automatic creation of sends.
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