I would prefer to use IP insted of /etc/hosts, as it's another potential source of error.
I'm not quite sure I understand what you want to do. Basicly you want a printserver functionality running on server1, and a client as station1?
I'm no cups guru, and it's a few monthes since I configured a print-server. If I remember correctly, ipp are used when the printer can be reached with an IP. (Network printers or when you configure a printer from the client). Therefore I don't believe you can use ipp on the server (Correct me if I'm wrong on this). What I think is happening here, is that the server connects to it self and print the job. The server accept, and will forward the job to the printer (It self), and that way looping an endless loop.
Then again, I could be embarrassingly wrong here.