I'm updating a website for a club and it hasn't been touched in a couple of years. It's still on WordPress version 2.6.

I tried updating the theme first on WP2.6. I keep getting the following error message when I try to activate the theme:
Fatal error: Call to undefined function home_url() in /home/hnpn2232/public_html/site/wp-content/themes/atahualpa3713/functions/bfa_theme_options.php on line 7

What do I do now? Do I need to update WordPress first? Any and all advice much appreciated. I'm following the instructions posted here: http://forum.bytesforall.com/showthread.php?t=8520

If you are on version 2.01 of Ataualpa you are way way back in time. I know the latest version of Atahualpa won't work with WP 2.6 either.

I think you are going to have to do a staged upgrade

While on WP 2.6, I would
do a full backup (database and files)
download version 3.1 of ataualpa and see if you can install that and get it to run,
do a full backup (database and files)
upgrade to 3.5.1 of atahualpa - if it works,
do a full backup (database and files)
upgrade WP to 2.8 - see if everything is ok
do a full backup (database and files)
swap to twenty-ten and upgrade WP to 3.3
upgrade to 3.7.5 of atahualpa - if it works,
do a full backup (database and files)
upgrade WP to 3.8.1
upgrade to 3.7.13 of atahualpa - if it works,
do a full backup (database and files) and
go grab a beer.

you can find the old versions of Atahualpa here
you can find the old versions of WordPress here

Thank you very much. I had a look and it seems that it's been about 5 years since the site has had any love. This is going to be fun!

Thanks for your help - I'm all set.