Indeed, there is conceptual difference between hierarchy structure
(tree) and network structure (links). Tiddlywiki is great because it
doesn't lock our mind in a hierarchical structure as many other tools
tend to do. But, sometimes, tree representations are useful (in a top
to down approach). Technically, there is no cycles, because, a folder
(a tag in the tree) never displays any of its ancestors, even if one
of them is tagged with itself (as a child). If a tiddler as several
different ancestors in the tree, it's displayed in each of them (there
is no problem there).
Pascal