So your subVI contains its own (perpetual) while loop -- is that right? You must understand: A subVI doesn't "finish running" until all of the loops inside the subVI stops. Therefore, Loop 2 in your Main VI cannot continue -- it is blocked because it is waiting for your subVI to "finish running".
You don't need that subVI. Just put all the blinking logic in Loop 2.
Anyway, it is best to post actual VIs, not screenshots. The screenshots might not show important connections.