Hi,Do you see "switchport mode trunk" command?If so, what you observe implies that ISL is not supported.Only if you have both ISL and dot1q you will see "switchport trunk encapsulation" command.When you configure "switchport mode trunk" the encapsulation will use dot1q.Hope this helps.
Your answer is interesting and correct for Catalyst switches. The switchport mode trunk command is a Catalyst switch command. The question here is about encapsulation on an 2600 IOS router which does not have any switchport commands.
I agree with Joseph that the issue is that encapsulation (VLAN trunking) is not supported in the IP BASE (or IP only) image that is running. Upgrade to a higher feature set (and hopefully a newer version) is the solution.
 After submitting my response I did check the Software Advisor on CCO and it looks like the IP PLUS feature set (even in 12.2T) requires 64 MB of memory and the current machine has only 32. So a memory upgrade will be required to do the IOS upgrade.
Knowing that older versions are often smaller, I hoped a older version would run in 32 MB. Just checked and found the 12.2 Plus version requires 48 MB and 12.1 requires 40 MB, so some additional RAM appears to be required.
NB: On some images, especially older versions, you can sometimes run with less than the specified required minimal RAM. Believe doing so is considered an non-supported environment by Cisco.
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