We just had this discussion over at OcUK last week so I can save myself some typing and just copy / paste my view
I say turn it off unless you are shooting helos / props and want to get blur on the rotors or if you are blurring the background at take off / landing. If you are, then mode 2 is the setting you want.
I say turn it off for these two reasons....
1) It slows down auto-focus. Give it a test, pick two objects, one far away and one closer. Focus on the closer one, get a focus lock and then change to the far away one and see how long it takes to get a lock on that. Compare with IS on and off.
2) This one is a more debatable point. IS in mode 2 works by detecting movement in either the horizontal or vertical axis. Which ever axis is moving it will damp (or try to) out movement in the other axis. So if you are panning a plane moving from right to left it will try to stop any up or down movement of the lens. If the movement is diagonal it will not damp in either axis (effectively it switches off). It also re-evaluates which axis is moving so it can change from one to the other. With something like an air display you are going to have movement in all the axis, including a lot in the diagonal axis and I don't believe IS can keep up with these rapid changes leaving you fighting the IS.