Ah! I think the penny just dropped. After re-reading and experimenting I think I've figured it out. You an actually store automation data in the clip, and that automation data can be looped but you have to unlink it from the region. That makes so much more sense. Actually, if I'm correct, it's cleared up all my main issues with Ableton. But, let's see if that is the case. Anyway, here's a moron's guide to looping automation envelopes:
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The key here is to understand the difference between Region Automation Envelopes and Clip Automation Envelopes. There is a big difference! You wouldn't notice it when you first open up Ableton. Clips appear in your session view and properties of those clips can be edited there (including automation envelopes). You can then copy these clips to the arrangement by going to the arrangement view and pasting them in. The clips literally get copied and pasted in to the arrangent and retain their automation envelopes. However, the confusing thing is that these clips now also have Region Automation Envelopes. These envelopes are the ones that you can see along the timeline in the arrangement view. However, it seems these can't be automatically looped. To automatically loop an automation envelope, you have you loop the Clip Automation Envelope. Here's one way to do it:
1) Create your melody in by recording a midi track from your keyboard or manually adding the notes
2) Cut the recorded region from your arrangement and paste it in to a Session clip cell
3) Select the cell in Session View
4) In the bottom left hand corner click the "E" button. Make sure it is yellow (next to "L" and the musical note in the "Clip" box)
5) In the top left of the "Envelope" box, select the parameter you want to automate from the drop down lists.
6) Make sure the Region/Loop toggle button is set to "Unlinked" and the "Loop" button is enabled (very important)
7) Edit the automation envelope in the window on the right

Now copy and paste the clip from the Session View, in to your arrangement
9) Ensure there are no Region Automation Envelopes along the arrangement timeline for the parameter you want to automate
Now, if you loop the clip along the timeline, the automation will be tied to the clip all the way along the timeline without the need for copy/paste.
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