Merc,
The gameport loopback is a pretty simple test, it is odd that it would fail. One possibility is if it is an expansion card that requires drivers. If the port is not available via the BIOS after POST the DOS product will not be able to test it.
If this is a motherboard based game port please tell me what make and model your machine is and post the log snippet referring to the joystick. It will look like this:
IEEE1394 Controller.....................PASSED
Joystick External Loop..................
No loopback present
Joystick External Loop N/A
-Fred