Yes, you're right, though the Loka Táttur is a very late ballad (it wasn't collected until the 19th Century, some 800 years after the Norse were converted to Christianity). My references are pretty adamant that there was no cult of Loki (one book says it's the one thing all scholars agree on). Of course, the evidence is pretty limited, and religious beliefs and practices certainly varied greatly across the Germanic world and the centuries of paganism, so I suppose anything is possible.
As for volcanoes, arilou_skiff, are you sure you're not thinking of earthquakes?