Why do you think the oil wouldn't be flowing if the oil level light was flashing?
To the OP - if it's actually flashing continuously, that needs to be sorted. I would consider the sensor non-functioning in that case. Warranty? If not, do test it and replace as needed. The oil sensor is an oil level, not an oil pressure, sensor. It can come on when the oil is cold and you take off w/o a full warm up, and it will go off on it's own, or often if you stop after only a couple of miles, shut the bike off, turn the key off, then re=start the bike. It can flash w/o any pattern if your oil level is right on the edge of setting the sensor off, but that shouldn't be a regular pattern, just as the bike leans or accelerates/decelerates, etc. It's also not uncommon to see the oil light go off when the oil is dirty and you're close to your change interval. I use 5k, the US manual says 4k and the EU manual says 6200k (10k kms), so what ever works for you.
In the end, these bikes don't typically lose or burn oil. The first Gen bikes, which you have, do run some into the air box at sustained high rpms, (5k and above), but otherwise, you're probably unlikely to lose any significant amount of oil between changes w/o a trail incident of some kind, which hopefully you would be aware of. Still, the sensor is only around $40 p/n 23P-85720-00-00 Oil Level Gauge Assy.
