Why can't Loopback Address be used as source address inside packet?
We know that we can ping Localhost which means it can be used as Destination Address.
Why can't Loopback Address be used as Source Address inside packet?
It can be used as the source address, and in fact it is the source address when you pinged localhost!
Network traffic to/from localhost is the same as any other network traffic except that it never leaves the host. The localhost address is both source and destination address.