If you're connected to the RPi over ethernet (and it sounds like you are) - it's not going to magically switch to using the WiFi connection when you unplug the ethernet. The blue light flashing can mean anything - but until you've actually set it up to connect to your WiFi network, it doesn't mean anything.
You need to be sure that you're connected to the RPi to the IP address that's given to the WiFi device, NOT the ethernet device.
