The "theoretically possible" case of voters having cyclic preferences is actually quite reasonable! A rock-paper-scissors situation among the top 3 candidates doesn't require irrational voters or anything of the sort: all you need is for there to be at least 2 issues.

This is the rational response to Arrow's theorem - not to cynically conclude all voting systems are "bad", or that "dictatorship" makes some sort of sense, but rather just to say that if there's a rock-paper-scissors situation among the top candidates, one of them should win.