yes, as v2.6 doesn't have sqlserver 2012 compatible code. The queries run fine with setting 1 as well, but using setting 2 you can use features which are introduced in sqlserver 2005, and these are still supported in sql server 2012
In v4 we have a specific setting for sqlserver 2012 to utilize specific features introduced in 2012, namely better paging code.
so for you simply use setting 2, it'll work fine on 2012.