Am I reading this wrong? You seem to say:
1. "open (door/window switch is open, when door/window is opened - or when the wire is cut)"
2. "short (that would be an error state)"
3. "and resistance (loop completed and intact).
The "open" condition should raise an alarm (when armed), the "short" should create an error."
I inserted the spaces and numbers for clarity. Conditions 1 would seem to be both alarm and error states. And condition 2 would also be an error state.
I would think that two arrangements would be possible:
First, with the door and window switches in series and using the NC (normally closed) contacts to indicate they are closed. And a termination resistor at the end of the line.
1. Loop shows resistance to indicate all wires are OK and doors and windows are closed.
2. Loop shows open to indicate alarm due to open door or window or cut wire.
3. Loop shows short to indicate short as an attempt to bypass the security. This would also be an alarm condition.
Second, and perhaps a better arrangement with door and window switches in parallel and using the NO (normally open) contacts to indicate they are closed. And a termination resistor at the end of the line.
1. Loop shows resistance to indicate all wires are OK and doors and windows are closed.
2. Loop shows open to indicate a cut wire.
3. Loop shows a short to indicate an alarm due to an open door or window.
The problem with the second arrangement is that the individual door or window switches can be disconnected without cutting the loop by bypassing the connections to and from the switch before cutting them from the switch.
No system is perfect.
A short caused by a nail or screw being driven through the wiring may be more likely than opens due to thermal cycling or rodent damage.
The intention is to detect a cut wire (in alarm systems). So essentially you create a tri-state wiring: open (door/window switch is open, when door/window is opened - or when the wire is cut), short (that would be an error state) and resistance (loop completed and intact). The "open" condition should raise an alarm (when armed), the "short" should create an error.
We have this kind of installation in our office, and the yearly service includes disconnecting the devices (PIR sensors, contacts) and measuring the loop.