This can happen when a syntactically incorrect text is passed to a
merl:qquote/2,/3 call.

The parse transform optimizes calls to some functions in merl by
converting strings into templates at compile time. If this evaluation
fails (in eval_call/4 - for example because of a sytanx error in the
parsed text) the original function call should be kept unchanged.
However in case of qquote/3 the call is converted into a combination of
quote/2 and subst/2, but upon failure the original qquote/3 call is
substituted into the wrong place. E.g.:

this expression
  merl:qquote(Pos, Text, Env)

is first converted to
  merl:subst(merl:quote(Pos, Text), Env)

then if evaluating the quote call fails into
  merl:subst(merl:qquote(Pos, Text, Env), Env)

and the expansion is run again on the internal qquote/3 argument
resulting in an infinite loop.

This is now fixed so in case of failure the original qquote/3 call is kept.

As a first step to removing the test_server application as
as its own separate application, change the inclusion of
test_server.hrl to an inclusion of ct.hrl and remove the
inclusion of test_server_line.hrl.