Is it the inductive type pickup(wraps around a plug wire)? It may be that the sensor wire is too close to other plug wires or the coil wire and it is picking up more than one signal. The same thing can happen with the factory tach if the wire is too close to the plug wires.
Sounds like poor connection. It just takes the pulse signal from coil and creates a reading from it. If the coil or ground connection is at all loose it will create intermittent loss of signal thus causing erratic needle movement. Ya, sounds simple huh? LOL!!!
Make sure connections are tight, and when needle is jumping around, wiggle wires to see if that makes it better or worse.
Only the "inductive" type would be erractic if around other wires. This would be the clamp on style using the spark plug wire.
Hey, I think I figured out what was causing it... It is a multimeter-type tach, and so far I had only used it while my timing light was hooked up. Well, that damn timing light must be a doozy because the tach works perfect when the timing light isn't connected.
I also noticed, by connecting and disconnecting the timing light while the engine was running, that when I connect the timing light to spark plug #1 wire, the engine actually runs worse! Crazy huh? Why would that happen? Does the timing light somehow rob some of the engine's spark?