The research presented in this paper is motivated by the need for reliable inspection technology for the detection of bolt loosening in carbon–carbon (C–C) thermal protection system (TPS) panels using minimal human intervention. Based on the diagnostic scheme proposed in part I of the study, a new PZT (lead zirconate titanate)-embedded sensor washer was developed to constitute the sensor network. The sensor suite was included in the C–C TPS prototype without jeopardizing the integrity of the original fastening components. The sensor-embedded washer enhances the remote sensing capability and achieves sufficient sensitivity by guiding the diagnostic waves to propagate primarily through the inspection areas. After evolution of the sensor design and appropriate algorithm development, the verification tests were conducted using a shaker which simulated the acoustic environments during the re-entry process. The test results revealed that the proposed system successfully identified the loss of the preload for the bolted joints under loosening and gave the correct diagnostic results. The sensors were found to be durable under cyclic mechanical loads without major failures, and the diagnostic scheme was capable of locating a loosened bracket as well as discriminating major failure modes 1 and 2: panel and bracket loosening in the bracket.