first u must modify the /etc/xinetd.d/telnet, change 'disable=yes' to disable=no, then restart the service by use '/etc/init.d/xinetd restart' command. Then u can test telnet service from your pc, if the error message displays again. Then u must check /etc/hosts.deny, find that if there have ALL:ALL, if it existed, then u must drop this line via vi editor. After u modified, u must restart the service by 'service telnet restart' command. I think it will be right.