I experienced this issue with the ignition key in place failing to activate the immobiliser and the LED dash light remained flashing.
The sensor ring was moved closer to the end of the lock barrel and this worked initially. However, after a few months the issue returned. Eventually the hole in the plastic cowl was enlarged such that the ignition key almost touches the sensor ring. This worked and the flashing LED has been immediately extinguished on insertion of the ignition key every time for the last 6 months.
Of concern is what happens should this issue resurface. I am not convinced the root cause is the proximity of the sensor to the ignition key. There was a suggestion on here some ago that the wiring and/or connections between sensor and immobiliser may be defective.
Silly question but, not wanting to dismantle unnecessarily, can anyone point me in the direction of the immobiliser in order to check on the condition of the wiring?