No, you don't get dicon for flood or whatever. The connection is closed before anyone gets de-op'd at all. That script triggers something in mIRC that causes the connection to abort instantly as soon as your clone is given ops. Try it and you'll see you get the error 10053 in your status window
I have tested this extensively and it happens to me every time without fail. Also, I know it is an infinite loop but there was a condition originally set to break that loop. I pasted only the section above because that's what I have narrowed the 10053 trigger down to.
Finally, I noticed it started triggering the 10053 message when I used $snick instead of $nick($chan,o) (which I discovered didn't work, hence the swap to $snick).
Either way, it reproduces the 10053 message every time and as far as I know, it's the only method I have of reliably reproducing said error message. Just thought I'd be helpful and share my findings