Hi Andrew,
It is not easy to give you a useful answer as there are many variables that need to come together in a positive way to consistently achieve an acceptable yield of technically good images. I started by using similar camera settings to those required for avian flight photography, that is, short exposure time (1/2000 - 1/3200 sec) and the right aperture for the DOF required. This approach only works well in good light when the typical ISO required is 250 - 800. In overcast conditions the ISO required goes up by a factor of about 10x and the noise can get out of hand. So one is forced to go for longer exposure times and that is when the real challenge begins with long focal length lenses (>600 mm). I found with practice that I could get a reasonable yield at 1/1600 sec, then I aimed for 1/1250 sec and eventually found that I could get a reasonable yield at 1/640 sec. Like avian flight photography, the secret to hand-holding long lenses is practice, practice, practice. It is impossible to hold the big lenses steady for more than a few seconds so one must bring the camera up to the eye, acquire the target, focus, adjust the exposure and fire a short burst quickly, then lower the camera and rest for a few moments before having another go.
The lens IS is essential, either mode 1 or mode 2. I usually have my lens set on mode 2 (panning mode) so it is always ready for BIF. However, if you rotate the camera to portrait format, the mode 2 IS is now working in the horizontal plane and ineffective so you need to remember to switch to mode 1 to get both horizontal and vertical stabilization. For perched birds or slowly moving birds I use high-speed continuous shooting, AI Servo and focus priority for first and subsequent shots. I usually fire a burst of three frames then rest as mentioned above. Synchronizing breathing is important and try to keep calm.
I prefer to set my exposure manually. I set the aperture to give the required DOF, then the longest exposure time I think I can manage, and dial up the ISO while looking through the viewfinder to give about 1-stop of over-exposure on the lightest part of the bird. To do this I use spot metering and move the sensor over the bird to find the brightest part.
I hope this helps, regards,
Ian