The sensor just converts black and white to ones and zeros. This is a reflective sensor so white reflects the light back and turns on the photo device (transistor, diode?? doesn't really matter) on. I assume you are seeing the red LED with the shell off. If you run it at speed is it still blinking at a regular rate or does it stay off or stay on?
All the failed EOB boards I have seen fail around the power devices including vaporized circuit traces. Never had a problem with the tach circuitry other than adjustment.
Pete