You cannot wire the output of block 2 to the input of block 1 if block 2 has an input dependant on the output of block 1. A block in LabVIEW is not executed until all of its inputs are available at the terminals. You can see how all of the inputs would never become availabe at either block in your case. In order to implement feedback you will need to use a loop structure with shift registers. I have attached an example I created that implements an RS flip flop.
Matt Kisler
Applications Engineer
National Instruments