Loop in MPLS

Question

Hi,
Here is the standard MPLS network with vrf INTERNET:
PE2--P2--P1--PE1--INTERNET
|
CPE
PE1-routes
ip route vrf INTERNET 0.0.0.0 0.0.0.0 --> PE1
IP route vrf INTERNET 0.0.0.0 0.0.0.0 -- > INTERNET
vrf INTERNET 10.10.0.0/16 connected
192.168.0.5 is loopback for MP-BGP
PE2-routes
ip route vrf INTERNET 0.0.0.0 0.0.0.0 --> PE1
ip route vrf INTERNET 111.111.111.111 255.255.255.255 10.10.0.10
Route on PE2:
ip route vrf INTERNET 111.111.111.111 255.255.255.255 10.10.0.10 is misconfigured because nexthop is from network 10.10.0.0/16 which is directly is connected on PE1, and address 111.111.111.111 is not active
When I start the ping from CPE to 111.111.111.111 route on PE1 sends packet via P1, and P2 to PE2. PE2 has route that recursively points back to PE1. Ofcourse there is LOOP in routing network.
All devices except CPE are Cisco7600
Here are the questions:
1) With only one continuous PING packet-size 1500Bytes from CPE toward address 111.111.111.111 link utilisation P1-P2 goes up to 150Mbps. And with pings from more CPEs link utilisation rises. Why TTL doesn't prevent increasing of link utilisation?
2) CPU on PE2 goes up to 70-80%. Shouln't Cisco 7600 forward packets in hardware? Or maybe recursive lookup is done with CPU?
output from PE2:
Sh ip route vrf INTERNET 111.111.111.111
Routing entry for 111.111.111.111/32
Known via "static", distance 1, metric 0
Redistributing via bgp 65001
Advertised by bgp 65001
Routing Descriptor Blocks:
* 10.10.0.10
Route metric is 0, traffic share count is 1
PE2#sh ip route vrf INTERNET 10.10.0.10
Routing entry for 10.10.0.0/16
Known via "bgp 65001", distance 200, metric 0, type internal
Last update from 192.168.0.5 6d17h ago
Routing Descriptor Blocks:
* 192.168.0.5 (Default-IP-Routing-Table), from 192.168.0.5, 6d17h ago
Route metric is 0, traffic share count is 1
AS Hops 0
Regards,
A

Answer 1

sorry, I made a mistake.
CPE is connected to PE1 like this:
PE2--P2--P1--PE1--INTERNET
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CPE