I thought this was an interesting question so I dug up an "old" Rotary dial phone and hooked it up to one of our VG248's. Incoming calls work fine but you can't make an Outgoing call :( The Rotary dial phone will not break dialtone (which is probably expected).
Hope this helps!
PS. We don't use ATA's but I'm guessing the results would be similar.
On what device are you seeing the dial-type? I don't see it on the VG248 or in Call Manager. I think that this is for other equipment that we do not have(Cisco MC3810 and Cisco 3600 series routers, etc.).
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