Based on requirements for a next-generation rocket test facility, elements of a prototype IRTF have been implemented. A key component is distributed smart sensor elements integrated using a knowledgeware environment. One of the specific goals is to imbue sensors with the intelligence needed to perform self-diagnosis of health and to participate in a hierarchy of health determination at sensor, process, and system levels. The preliminary results provide the basis for future advanced development and validation using rocket test stand facilities at Stennis Space Center (SSC)1. We have identified issues important to further development of health-enabled networks, which should be of interest to others working with smart sensors and intelligent health management systems.