This paper addresses the design of a reactor system for manufacturing carbon nanotube (CNT) fabric and carbon hybrid materials (CHM). A web or sock of CNT is formed in a reactor tube in the gas phase pyrolysis method. The sock exits the reactor tube and is wound layer by layer onto a drum to directly form a nonwoven fabric. Metal nanoparticles and continuous microfibers can be integrated into the synthesis process to form CHM. Continuous direct manufacturing of fabric is an advantage of the method. However, the reliability of this manufacturing process in our particular reactor system is affected by several problems. These include occasional breaking of the sock, the need for daily cleaning of the ceramic reactor tube due to carbon deposits on the inside, sagging/bending of the reactor tube, and safety in handling the hydrogen gas produced from the reaction. Possible solutions to the problems are proposed. The importance of this research is that no other bulk material has the combination of properties of CNT hybrid fabric. If the properties can be further improved and customized, and if manufacturing of the material can be scaled-up at reasonable cost, many new commercial applications for nanotube custom materials could open up.