Instrument playing encapsulating old instrument (7)
I believe the answer is:
bassoon
'instrument' is the definition.
(bassoon is a kind of instrument)
'instrument playing encapsulating old' is the wordplay.
'instrument' becomes 'bass' (bass is a kind of instrument**).
'playing' becomes 'on'.
'encapsulating' means one lot of letters goes inside another (I've seen this in other clues).
'old' becomes 'o' (common abbreviation eg in OE for Old English).
'on' going around 'o' is 'oon'.
'bass'+'oon'='BASSOON'
(Other definitions for bassoon that I've seen before include "Low wind instrument" , "Tenor of the oboe family" , "Double-reed instrument" , "No, a boss would be a musical instrument" , "It is played" .)