As far as the controller is concerned generally only the manufacturer knows how the health of the system is recorded, as a rule there is a watch dog timer on the processor that can take action internally in the event a processor shuts down, and also have impact on a physical output such as the E-stop output which will shut down the machine down by hardwiring detection using a Safety Relay.
W.D. fault will also shut off the servo amps.
As far as monitoring outboard functions, this is generally under the discretion of the machine tool builder, as this falls under the ladder logic used to control machine M,S,T functions, M=Machine Function, S=Spindle speed, T=Tool selection.
As you say sensors can be incorporated such as broken tool, and tool load detection to automatically control feed rate.
The methods are as various as there are control manufacturers, so I think they can only be described in general terms.
Not to sure if this is what you are looking for?
Al.
CNC, Mechatronics Integration and Custom Machine Design
“Logic will get you from A to B. Imagination will take you everywhere.”
Albert E.