Characters can still be interacted with and it breaks the cycle, when Gabriel's hanging out on the side of the park opposite the Shaved Ice Stall, I saw some NPCs get stuck walking tight circles around him (Yukio, Ryan, Blake, Anahita, Kaida). I watched for a while and saw some NPCs approach him without issue (Chiyo, Sota, Katherine, Philip). I couldn't see anything obvious that seemed to trigger it one way or the other.

I haven't seen anything like this happen anywhere else in the game, so it seemed worth reporting ^_^