I'm not sure what bulb is in your timing light. The setup I use is a 12 volt taillamp bulb from a car, and a 12v battery. Put 12 volts to the bulb, connect the other side of the bulb to the wire coming out of the points, and ground the battery negative to the frame.
With this setup, the light will go bright and dim. You want the transition to happen right when you've rotated the flywheel "Fire" mark to the index.
So, the key to answer your main question is that the light should go bright and dim, rather than on/off.
You did connect the points to the condensor, right?
- Frank
1984 200ES Big Red
1985 350X (x2)
1986 350X
1986 250SX
1984 Auto-X
1984 ATC70
1985 ATC70