I have been running some zf7363 AP's in standalone mode for a couple of years. I was adding a Zone Director 1100 to manage these. I upgraded ZD to 22.214.171.124 build 373 software. This went OK until I put it on the same network as the AP. The AP found ZD and in the monitor screen it can see it. The AP doesn't appear to successfully upgrade from 126.96.36.199.8, it just goes into a loop that takes about three minutes of booting, discovering the ZD and trying to upgrade.
I have seen this too twice in similar scenario just like yours..
How i solved it was, did a hard reset on the AP(s), reconfigured the AP, upgraded manually to controller firmware version. Once AP was up and running on new version as standalone, connected it to controller.
this did the trick in my case.. Give this a shot...