On a nested event which contains a loop, a transition, is persistent, or whatsoever (in short: isn’t “oneshot”), the cut button shouldn’t do anything. Which is easy to understand: the event has to cut anyway, otherwise it would loop indefinitely (the stuck loop that you fear!). If it does something different with the cut button checked or unchecked, it’s probably a bug, which could be similar to the one I found (and was fixed) some time ago.
By the way, I would advocate hiding this button in the case the nested event isn’t oneshot, in a future fmod update, it will make things clearer.