Stop isql.exe and reboot your server. Remember, you will need to apply SQL Server sp5a it is required to run SQL 6.5 in a 2000 server, otherwise it won't work.
When applying SQL server 6.5 in a Win 2000 box, it replaces the DTC service and install the MSDTC from the CD, this causes sometimes the isql executable to hang. Rebooting seems to do the trick. Good luck!