I'm not an expert, but here's what I've learned.
When you have an FX loop, the return is always on, even when the loop is switched off. Turning the loop off kills the SEND (not the RETURN). This is advantageous when you have delays/reverbs in the loop, the trials are audible after the loop is switched off.
In your case, the noise from your distortion pedal continues to be audible after the loop is switched off. This is kind of a bummer.
As a workaround, maybe you can assign another controller to the mix parameter of the FX loop (either 0% or 100%), rather than bypassing the loop. It actually might sound cool to sweep the mix through a distortion pedal.
It would be great if there was a lot more flexibility with the loop: kill the return on bypass, dual mono loops, etc...
