Schottky diodes composed of palladium deposited on silicon carbide (Pd/SiC) detect hydrogen and hydrocarbon gases at elevated temperatures with high sensitivity. Previous examination of the properties of the Pd/SiC structure indicated that its forward current responded to the presence of hydrogen even after extended annealing at 425 degrees C. However, drift in the sensor properties suggested that stabilization of the diode structure was necessary. In this work, we examine the effects of placing a thin layer of silicon dioxide (SiO2) between the Pd and the SiC. Both Pd/SiC and Pd/SiO2/SiC diodes are annealed at 425 degrees C for 140 h and the electronic and interfacial properties of the annealed diodes are compared. The electronic properties and sensitivity to hydrogen of both diodes change significantly due to the annealing. Scanning electron microscopy and Auger electron spectroscopy indicate that the surface and interfacial properties of the diodes are very different. The Pd/SiC diode has a broad interface region with palladium silicides (PdxSi) distributed throughout the Pd. In contrast, the Pd/SiO2/SiC diode has a sharp interface with significantly less PdxSi formation. A silicon oxide (SiOx) layer has formed in the near surface region of the Pd which likely accounts for the relative insensitivity of the Pd/SiO2/SiC diode to hydrogen. The experimental data suggest that the mechanism for this SiOx formation is likely two-dimensional diffusion between the Pd and the surrounding SiC surface. While the thin SiO2 layer results in a sharp interface between the Pd and SiC, further stabilization of the diode structure is necessary for long term, high temperature sensor operation.