The tachometer in Mustangs is current triggered and operates on the fluctuation in current supplied to the ignition coil, caused by the points or electronic ignition grounding and opening, which loads and unloads the coil to create the spark. As such it will not work on the tach signal wire from your new distributor.
You have two ways to resolve it. One is to have Rocketman (a forum advertiser and supporter) convert your tach to a 3-wire tach. The other is to install an MSD tach adapter (part number 8920).