Hi,
I assume you are talking about the blue USB-interface from Hitec? Yes indeed, if the blue light starts to blink very fast, then that means that the USB-interface detects the signal from the transmitter. So this part should be OK.
I assume that the settings in the FMS-program are correct : controls->analog controls->joystick interface, then calibration
Does your PC detects the USB-interface?
I'm not sure about the terminology, having no English Windows :
settings->configurations->game options then look if the USB controller is detected. eventually unplug the interface and plug-in again to see if that changes anythinh in this screen. If your PC detects the USB-interface, eventually calibrate-it in the same screen.
Hope this can help. For Win 98 and Win2000 there is not any software to install for this Hitec-USB-interface and it works like a charm.. I don't know for Win XP...
Hope this helps,
Olivier TX2TX