Harvey, There would be no need for the chain loop if the freewheel stayed on the bike as the chain would stay on the cog.
Greg Reiche pointed us to the picture in the Data Book page 140, and it shows there is a "wingnut" that passes through the washer and then threads into the hub. It shows the hub with freewheel being removed from the same dropout. Good reference Greg!
Most guys I know would just pick the damn chain up with their fingers and put it back onto the cog,,, then wipe the grease onto their shorts,,, thats why the're black, right? Must have been more civilized back in the old days.