you wouldn't get that error then, the protocol version field in the request would be 4 instead of 5, and that error you see only occurs if the client specified v5.
It is possible some other socks servers ignore the address type field if it is unknown, and assume it is IP4.
You aren't running an IPv6 network or something are you? there was an experimental additional address type defined for IP4 to IP6 bridging (ATYP 8), but that was never ratified.
All info on SOCKS is looked after by NEC, at
www.socks.nec.com. If you read all the specs like I did, you'll see there is no mention of any address type 2. I would be interested to hear what the developers of the client have to say about it.
Adrien