Are all context-sensitive languages decidable?
First, all context-sensitive languages are decidable, since they can be accepted by a LBA (as you said), and a Turing machine is more powerful than a LBA. 

However, you were asking about something else. Can there be LBA that cycles? The answer is yes. You gave an example. However, you can modify every LBA $M$ to a Turing machine $M'$ that accepts the same language but never cycles. To see this, observe, that you can simulate $M$ on $M'$ and keep track of all configurations the LBA has attained so far. If there is one configuration that shows up twice, you detected a cycle. In this case you stop rejecting. The important thing here is that the LBA uses on linear space, and hence the number of its configurations is bounded.