Well in the telnet server setup, have you bound the telnet server to 127.0.0.1? (If it's possible). For FTP you have to explicitly bind the server to every address you want to be able to FTP too, I havent set up telnet myself but it may be the same.
Also, can you telnet to your ACTUAL ip address? Say 192.168.0.45? (or whatever it is)