I never found a complete how-to for this and had to figure it out for myself, so here's the deal...
At first, I just removed the white wire from the pot and bridged the other two terminals of the pot with a jumper wire. But, as others have described, this caused the amp to go silent if the loop wasn't in use. If this is all you do for the mod, then you have to use a cable to patch the send and return jacks together. The solution is to move the bare wire that comes from the positive "no-plug-inserted" side of the return jack so that it connects to the positive terminal of the send jack.
So here's the complete how-to for the FX loop mod:
1. Remove the white wire that goes to the mix pot and tape it off. This wire seems to connect back to the FX send positive terminal, but it goes through the circuit board in-between for some reason.
2. If you're leaving the mix pot in place, just put a jumper wire between the orange wire and the pink/red wire on the pot to effectively bypass the pot. If you're removing the pot, connect the orange wire and the pink/red wire. The red/pink wire is the positive lead from the FX return jack (from the side of the jack that's active when something is plugged into the jack). The orange wire goes to the power amp.
3. At least on my early 1991-ish DC-5, there's a bare wire coming from the FX return jack that normally meets up with the orange wire at the mix pot's middle terminal. Move this wire to the positive terminal of the send pot. This wire is the alternative route of the FX return when there's nothing plugged into the jack. When there is no plug in the return jack, the jack bridges that no-plug-inserted positive terminal to the plug-inserted positive terminal (which is where the pink/red wire is). So when no plug is inserted, you now have a circuit connecting the send positive terminal to the pink/red wire, which connects to the orange wire, which goes to the power amp. So we now have a proper bridge between send and return for when nothing is plugged into the loop. No patch cable required.
Enjoy.