tach misreading - showing wrong rpm's

Yes, the cam sensor would time sparks, but what typically happens in computer setups is the crank sensor will look for the missing tooth first and then look for the #1 cylinder on the cam sensor to make sure they line up. If they are off the the computer sees the signals as not in sync and will typically not send spark. At least that's how the Megasquirt setup is, though I think the methodology is fairly typical for most computers. It's kind of like a test to make sure both sensors are working right that the computer does.