No, since all component operations to a given transaction happen atomically, there really is no counterparty risk: Either the proposing actor manages to make a profit and "pay back" the flash loan (plus interest, apparently), or the entire deal does not go through.
> Otherwise, someone could keep running this trade on repeat until they’ve accumulated an amount equal to the gross product of the universe.
No, they can keep on repeating the trade (which is usually arbitrage of some sorts) exactly until the arbitrage opportunity is gone, which usually is quite soon – unless somebody has made a serious pricing mistake somewhere.
> Something can’t come from nothing.
It (i.e. arbitrage profit) doesn't come from nothing – it comes from seeing a market inefficiency and a way to profit from it. The actor that sees it is rewarded by profit; the entire market (i.e. all of its participants) benefits from better price quality.
None of this is a crypto innovation either: This is exactly how traditional finance/payments multi-currency net settlement works.