Estimation of the energy from a given Boltzmann sample is straightforward since one just has to average the contribution of the individual configurations. On the other hand, calculation of the absolute entropy, S (hence the absolute free energy F) is difficult because it depends on the entire (unknown) ensemble. We have developed a new method called "the hypothetical scanning molecular dynamics" (HSMD) for calculating the absolute S from a given sample (generated by any simulation technique). In other words, S (like the energy) is "written" on the sample configurations, where HSMD provides a prescription of how to "read" it. In practice, each sample conformation, i, is reconstructed with transition probabilities, and their product leads to the probability of i, hence to the entropy. HSMD is an exact method where all interactions are considered, and the only approximation is due to insufficient sampling. In previous studies HSMD (and HS Monte CarloHSMC) has been extended systematically to systems of increasing complexity, where the most recent is the seven-residue mobile loop, 304-310 (Gly-His-Gly-Ala-Gly-Gly-Ser) of the enzyme porcine pancreatic alpha-amylase modeled by the AMBER force field and AMBER with the implicit solvation GB/SA (paper I, Cheluvaraja, S.; Meirovitch, H. J. Chem. Theory Comput. 2008, 4, 192). In the present paper we make a step further and extend HSMD to the same loop capped with TIP3P explicit water at 300 K. As in paper I, we are mainly interested in entropy and free energy differences between the free and bound microstates of the loop, which are obtained from two separate MD samples of these microstates. The contribution of the loop to S and F is calculated by HSMD and that of water by a particular thermodynamic integration procedure. As expected, the free microstate is more stable than the bound microstate by a total free energy difference, Ffree-Fbound=-4.8+/-1, as compared to -25.5 kcal/mol obtained with GB/SA. We find that relatively large systematic errors in the loop entropies, Sfree(loop) and Sbound(loop) are cancelled in their difference which is thus obtained efficiently and with high accuracy, i.e., with a statistical error of 0.1 kcal/mol. This cancellation, which has been observed in previous HSMD studies, is in accord with theoretical arguments given in paper I.