Please cite your source... so that I can confirm the conclusion is official. I can not find anything in the rules that a given trigger will only cause a reaction to be used once... going by what is actually written.
I am still inclined to allow the combo as it does make for a very effective berserker that just pummels a target into submission (a persistant Lieutenant that is irritating the character to the main villain that thinks they are stronger). This would be like the Hulk repeatedly pounding Loki into the floor at Stark Tower during the Battle of New York in the Avengers... stoping only once Loki was Out... or the Flash delivering multiple blows in rapid fire to Weather Wizard after taking away his weather control rod in Justice League vs. Teen Titans (okay, not exactly perfect examples, but examples of multiple attacks by heroic characters against a villain).
I think the inherent weakness of the combo balances it out... both the consequence of multiple minor twists or the potential of knocking oneself Out (given that this combo is only available in the Red Zone) limits any potential abuse... as is the fact that one actually has to be damaged by the Triggering Attack (if the Attack did no damage due to some Resistance/Mitigation or Defend action) you can't trigger the combo. So, if a character has some sort of Innate protection (immune to a type of energy or damage is reduced by a given amount depending on their Zone... or they can just ignore damage done to them due to another Ability), then Reactive Strike can not trigger from an attack that doesn't deal damage and thus the combo falls apart. This is the double edge part of the combo... in order to use it, they have to take damage initially (and when in the Red Zone, they usually don't have much Health left). The more they want to use it, the more damage they will need to take to initiate it and likely have to take to maintain it.
Besides... I think that the Rule of Cool is the ultimate trump in regards to this combo. Who didn't chear when Hulk smashed Loki in Avengers? In the end, it is likely going to be a finishing move... for either the target it is used against or the Hero that uses it (especially if they are indiscriminate with its use).
Besides I can already think of a few ways that would shut this combo down... or at least make any player who relies on it too much to rethink their choice. For a single ability, Impenitrible Defense could very likely shut this down on its own... as this ability (provided by Material, Psychic and Self Control powers) allows one to Defend against all Attacks until their next turn as a Reaction (and get their Max + Mid dice to do so). At best, this will negate every attack made while the attacker keeps taking more and more damage, while at the very least, it reduces the damage taken (with the hope that the defender out lasts the reactionary attacker's ability to maintain the relentless attack). Reactive Defense (from Physical Qualities) in combo with Push Your Limits would also be a fairly effective defense (or at least slow down one's attrition of Health until the Berserker falters. Push Your Limits and Defensive Deflection (from Self Control) would be a very effective counter... as one gets to Defend against each Attack (suffering only 1 damage from each from Push Your Limits) while redirecting any damage that wasn't Defended against to other targets (such as the Berserker's allies). I am sure other options will also be available once we get the rules for creating villains.
In the end, I think this combo is a very creative one players have come up with for a character. Now if the abuse of it gets out of hand and begins to spoil the fun the group has (how many times have the Avengers used the Hulk Smash! threat to intimidate villains into surrenduring?) then I will reconsider how the combo functions... but until then, I think I will let players have eat their cake and have it too.