Hi,
Sorry for the slow response. Your last presumption presumption is correct - "Go to loop on empty" makes the test case jump to the datasource loop only when the datasource contains no data whatsoever, so I don't think this option is what you're looking for in your use case.
As for why your script isn't working, I'm not sure; I got a similar scenario working just fine (I've attached the project). If you could attach your project file I would happily take a look.
Otherwise, if I've misunderstood something, please let me know.
Regards,
Arian
SmartBear Sweden