The reconnect files is asking to reconnect to the correct file, but then generating an error because that photo exists. Pressing OK only represents the error. It does not look like there is any way to exit this other than shutdown photoshop elements through the task manager.
These files were on the C: drive
There was no way to break out of the loop.
It turned out that it was not an "Infinite" loop, it just wanted to ask me the same question for each of the 200+ files it found already existed.
This is a problem/but. The system has to let the user out of loop. What if there were thousands of files.
Also: the entire process needs reworked because it is ambiguous and confusing from the UI point of view. It amounts to the system telling me "I can't add this file I can't find to the system because I know it already exists in this specific place". Whatever the real issue may be is not being communicated through the dialog and options.