If there is no visible damage to the sensor itself, and the wire(s) are in good condition along with the connector and it is sealed without any exhaust leaks there's really no reason to fail the part for a stripped hex nut.
Here's some advice from a fellow smog tech. Threads get stripped or cross/threaded . Nuts and bolt-heads get rounded off.
So from the sounds of it, you inspected a car that had a rounded02 sensor nut? Me personally, if i seen that i'd probably give the wire a yank and see if it was in there solid, and pass it. All that probably happened is someone replaced it themselves in their driveway and they probably didn't have one of those 02 sensor tools and rounded the nut trying to get it tight. Doesn't seem to me to be a legit reason to fail someone.
The only way you'd ever know the 02 sensor was stripped would be if you pulled out the old one and pulled out some of the threads out of the exhaust pipe (just like a stripped oil drain plug). Then tried to re-install and it was super hard to get tight. That would be stripped or possibly also cross-threaded.