Pretty funny story, thanks for sharing. When I used to work desktop support, I ran into a few instances of malware that used this nasty tactic of two or more daemons that restart each other.
Stories like this pop up on HN over and over, (The same stories.) instead of waiting for reruns, is there some kind of place where they've all been collected? (Sort of like folklore.org)
I've got a feeling that I first heard this story in the paperback version of the Jargon File - The New Hacker's Dictionary (3rd Ed). That book alone is a pretty great compendium of stories from the 70s and 80s.
If this happened after the third quarter of 2001, they would've gotten to experience the "SWAT Team Alarm Clock" followed by some lengthy interviews by the Homeland Security department.
I was introduced to this story in a computer science class assignment which tasked me with replicating this pair of programs (it ran in Linux). Testing it was a PITA!
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[ 2.3 ms ] story [ 29.5 ms ] threadEDIT: Besides the jargon file(s).
http://catb.org/jargon/html/magic-story.html
(And look, no snark in the comments!)