Health monitoring is of critical importance in maintaining the integrity of high-speed rotating machinery. In this paper, a health monitoring strategy based upon the acquisition and analysis of vibration measurements is described and evaluated. A common technique in this regard is to track changes in the synchronous vibration due to imbalance. However, such an approach must consider the controller strategy used with the magnetic bearings. Herein, a simulation model is developed that consists of a flywheel system supported by magnetic bearings, which are controlled using an adaptive strategy that suppresses synchronous vibration. The interaction between the rotor vibration and the controller responses are evaluated in order to provide insight into indicators of crack initiation and growth. The results and conclusions are also validated using an experimental test rig. Some insights and guidelines as to appropriate strategies for crack detection in rotor systems interacting with active bearing controllers is presented and discussed.