 Solution

The degree-one generation condition for Proj ensures that the opens $D_{+}(f)$ for $f\in S_1$ cover $X$. Put $B=S_f$ and $R=B_0$. Multiplication by $f^n$ is an $R$-linear bijection $R\to B_n$ for every integer $n$, because $f$ is an invertible degree-one element. The convention $S(n{)}_d=S_{n+d}$ therefore identifies $\widetilde{S(n)}$ on this chart with the free rank-one $R$-module $B_n$, generated by $f^n$. Hence every twisting sheaf ${\mathcal{O}}_X(n)$ is invertible, including negative twists.

For the tensor product of sheaves, consider the natural mapIt is an isomorphism by degree-one localization of a graded module. Explicitly, a homogeneous tensor $m_a\otimes n_{-a}$ of total degree zero is represented on the left by $f^{-a}{m}_a\otimes f^a{n}_{-a}$. Multiplying a tensor factor by a homogeneous element of $B$ gives the same result after using the tensor relation, since that element is a degree-zero coefficient times a power of $f$. This defines the inverse. Since localization commutes with tensor products, the target is $((M{\otimes }_{S}N{)}_f{)}_0$. These natural chart maps agree on overlaps, soThe degree-one hypothesis matters: on general Proj constructions, twisting sheaves need not be line bundles. The local trivializations are also recorded in Stacks Project, Section 27.10.