If an Insect card is milled this way, you won't be able to put a loyalty counter on Grist, but you will still repeat the process
Lets look at the heavy hitters from D&DDH, shall we
Escape the Mox, tap it for mana, sac it to Station milling yourself 3 cards, escape the Mox again by exiling the 3 cards you just milled which untaps Station, rinse repeat for a ton of mana and exiling your entire library
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If Phantasmal Image somehow enters at the same time as another creature, Phantasmal Image can't become a copy of that creature