I dropped the 350HO in my 69 and had the same exact problem. This may sound lame but, after tuning the car, eliminating various vacuum leaks and setting the timing to the GM recommended 10 BTDC and 36 total my AutoMeter street tach quit jumping all over the place. Perhaps this doesn't answer your specific question but, at least you know that it might not be a serious problem. I don't believe that your cap is cracked. Let us know if you have already tuned the car as mentioned above. Maybe some of the electrical wizards in here would be able to shed some light on the problem if you have already tuned the motor.
1969, X-44, Export Model, Hugger Orange, Std. Int., BT 12 bolt, PDB, GMPP 350HO, M22 Supercase, SSM Lift Bars, AirGap, Holley 750, FlowMaster American Thunder Exhaust, FlowTech Headers, 15X7 Ralleys