There is no default keybinding related to playback bound to spacebar. Loop Song also has nothing to do with pattern looping or not, it determines whether the song starts playing from the beginning when it reached the end.

There is a multitude of key bindings that can be used to either play the whole song or play the current pattern only. Depending on which one you assigned to the space key, it will either set (shortcut names starting with "Play Song ...") or unset (shortcut names starting with "Play Pattern ...") the "loop pattern" checkbox. It's always been this way.

Here is me just pressing space bar, it keeps disabling it but it doesn't if I click either of the buttons:
https://streamable.com/026i8b

So it must be a keyboard shortcut that's turning it off? Well:
https://files.catbox.moe/ukhrhk.PNG

Here's what I have set for play/pause:
https://files.catbox.moe/mzufah.PNG

Is there a way I can use Play Song From Cursor/Pause with Spacebar and not have Loop Pattern turn off? Could there be an option that doesn't turn this setting off when the song is played?

As said, Play Song means play the whole song. That's why it unchecks the checkbox. Essentially what you want is a different shortcut, Play Pattern from Cursor / Pause, which does not exist yet.

Would it be possible for Play Pattern from Cursor / Pause to be implemented? I'd find it very useful when I'm working on a small section of the track, and I always use the Spacebar to playback the song from the cursor.