Why am I seeing a sine wave from my finger pulse transducer?

When the recorded signal does not match the expected signal from the transducer, a good place to start is the input amplifier dialog from the channel calculations popup menu. 
This is the LabChart 8 input amplifier dialog for a PowerLab 26T with all filters in the default position (all off except Anti-alias):
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All hardware filters (the filter options in this dialog are for hardware filters) are applied to the signal as it enters the PowerLab, and cannot be undone.  Any changes made here will be saved in data and settings files.

Here is an example of a typical finger pulse transducer signal with no filters applied:

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Below is an over filtered finger pulse transducer signal with the lowpass filter set at 1Hz and AC coupling turned on:

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Note how the incorrect filter settings completely transform the signal.  While the exact set of filter options will vary with the model of PowerLab attached, when in doubt, leave the filters in the default settings or turn them off entirely and use the Digital Filter Channel Calculation Feature, which can be changed post-analysis.