You need to be more clear about your intentions. What are you trying to telnet to/from? If you want to telnet to your phone, it's not as easy as running telnet on your computer by entering your phone's IP address. You have to run a telnet server on the phone -- otherwise the connection is refused. The best way to tell if you are actually rooted is by using Terminal Emulator. When you run Term you will see a "$", this is a user prompt, where you type in commands. The "$" means you are a normal user, not root. HOWEVER, if you type "su" and hit enter and you end up with a "#" prompt, that means you are superuser (root). If you can successfully get a superuser prompt, you are properly rooted. (You might get a superuser permissions request for Term when you first run "su").
Once you are on a superuser prompt you can run a telnet/SSH server (telnet is not recommended, as it is insecure).
To see if you have an SSH server installed on your phone (you should already if you run a mod, otherwise you will probably have to install one manually), type the following command (as root) in Term:
find / -name dropbear
It should return "/system/xbin/dropbear", unless your mod has a slightly different filesys structure, in which case it might return a slightly different string, or error out altogether.
If you do have dropbear, you can continue reading (otherwise install dropbear first, then continue from here).
Now, as root in Term (make sure you have the "#" prompt, or type "whoami" to see what your username is), enter the following commands one at a time (stop if any give an error). Be VERY cautious when entering commands as root! Make SURE you type everything exact including proper case.
mount -o remount,rw -t yaffs2 /dev/block/mtdblock4 /system
dropbearkey -t rsa -f /system/etc/dropbear/dropbear_rsa_host_key
dropbearkey -t dss -f /system/etc/dropbear/dropbear_dss_host_key
IF THE ABOVE COMMANDS WERE SUCCESSFUL enter the following commands to complete the process:
mount -o remount,ro -t yaffs2 /dev/block/mtdblock4 /system
You now have SSH server capability on your Android device. Note that this does not mean you are running and SSH server at this point, only that you are capable.
To run your SSH server, first enter the following (again, as root) in Term:
dropbear -p WANIP
(Replace "WANIP" with the external IP of your phone -- the IP you want to SSH in to)
Your SSH server should now be running. You can check this by typing:
It should return a line that ends with the word "dropbear"
NOTE Depending on your version of Android or mod, some of these steps may vary. If you encounter a problem (dropbear doesn't run, or you can't SSH in), first check if dropbear is still running (above command) and then run "dropbear -E" to see why it won't start if it is not running.
I'm more than willing to answer any further questions you may have. Happy hacking!