yes it is supposed to blink, so that is a good thing. Your test has verified that the cvr is performing it's basic function of switching b+ on and off in an attempt to produce an average voltage of ~5v. That does not however mean that it is working withing calibration. You've also verified the gauge's heater element and wiring to the tank are still intact. Again that doesn't mean that the gauge is properly calibrated and the wiring doesn't have any excess resistance. All in all though that test proves that the basic system is intact and "working" up to the fuel sender.
It also points to the sender or it's lack of a proper ground as the most likely cause, if Your gauge is totally in-op. If your gauge just reads low then excess system resistance or an out of calibration cvr or gauge could be the problem.
The sender should have a resistance of 10 ohms when full and 73 when empty.