Is this still a problem?
I have used the Garmin speed/cadence sensor to pair with the Forerunner 610 and Edge 510. I don't recall doing anything special I followed the directions from the manual and everything picked up without concern. Each time I go out for a ride, the devices pick up with ease.

As for the red/green light on the sensor itself, I don't recall noticing if it blinks unless I have reset it. Then the green light will light up to indicate that it is working.

Although, in full disclosure, I never look to see if it lights up anymore since I haven't had an issue with it not being picked up by either the FR610 or the Edge510. So it may very well light up and I just don't look for it.

Sorry couldn't be much more help.