To make the 401K transfer to the new employer the entire balance needs to move to avoid any tax and penalties. You will need to pay off that loan within the window given and definitely before you roll the balance. Any loan amounts not paid are considered distributions and are subject to tax and penalties if you are under the age of 59.5 .
So to the IRA contribution idea... if you are not going to pay the loan off and you are not subject to the penalty then you may be able to contribute to a Traditional IRA subject to contribution limits and deductible limitations.
