Mode 1 tries to prevent all movement. You won't want that.
Mode 2 tries to figure out whether you are trying to pan horizontally or vertically and will reduce shake/vibration at 90 degrees to the pan. It would be a good choice if you are panning exactly vertically or horizontally.
If you are attempting to pan diagonally, or follow erratic, swooping movements by the birds then turn IS off. It will fight with your attempts to follow the birds, causing an odd, jerky sensation in the viewfinder and probably doing more harm than good. My advice would be to turn IS off completely and use a high shutter speed of around 1/1000 or more to minimise the appearance of shake. I use the 100-400 myself for BIF and that's my approach. There are plenty of birders who do very nicely with the unstabilised 400/5.6L. They don't seem to have a problem shooting without IS. So long as the shutter speed is sufficiently high, hopefully neither will you.
Here's an example from Gigrin shot at 400mm and 1/800, without IS, slightly cropped and tweaked.....
If you have the opportunity to pick the day you go, try to choose a day when the wind will be coming from behind you. That way the birds will soar gracefully towards you, making shooting easy and giving you lots of opportunity to capture the eyes. When I went it was a dreadful time of year, with the sun high in the sky and the wind into our faces. The easiest shots to make were of the birds' arses - not my favourite kind of shot. If we'd turned round to shoot the birds as they approached from behind us we would have been shooting into the sun. It was a poor day.
HTH
