Leveraging the Phase I achievements of the Distributed Rocket Engine Testing Health Monitoring System (DiRETHMS) including its software toolsets and system building blocks, the Phase II project seeks a comprehensive prototyping of the technology. Phase II not only expands the functionality and applications of the Phase I achievements, but utilizes evolving diagnostics due to the advanced intelligent algorithms built on AGNC's Optimized Neuro-Genetic Fast Estimator (ONGFE) framework. In this way, the Phase II effort culminates in a product that is able to adapt to unknown operating conditions and learn new failures in an unsupervised way. Additionally, a major effort consists of providing a novel, robust, and embedded software toolset for sensor Failure Detection and Identification (FDI): Sensor Data Validation and Self-Healing Scheme (SDV-SHS). To increase the commercialization potential and market values of the NASA and non-NASA applications, the Phase II project adapts DiRETHMS to the market requirements. The work in Phase II along with a modular architecture and standardization ensures a solid integration with NASA's Integrated System Health Management (ISHM) for enhanced health monitoring.