Hello @Ecommfox! It sounds like the error handler is designated as a Global Error handler in your workflow and would explain why you cannot connect nodes to it.
For your workflow and the loop block, are you looping over sets of 500 rows or is each workflow run 500 rows only? Would you also mind sharing a screenshot of your loop block setup? We aren't able to access each others workflows via a shared link but I think I have a good understanding of what you are trying to do.
I recently wrote a post about using functions and loop blocks to catch errors in a more meaningful way which might help you derive a solution: