When i connet two systems using telnet or gftp i get error
connection refused . I asked this question before in this forum and
the reply i got was "check your system security settings"
* my question is-- inorder to establish a connection using telnet /gftp
what should be the security options to be set at the time
of installation

The first thing I'll do is refer you to:
http://wiki.linuxquestions.org/wiki/Telnet_and_SSH

This explains why we would reccomend using ssh instead of telnet if you can. You are probbaly getting connection refused messages because your firewall is blocking the requests. Take a look at the output from:
iptables -nL

Am I the only one who has used ettercap before?

SSH passwords can be sniffed just as easily as telnet passwords.

From my understanding, that only applies to SSHv1.

Edit: In fact I just checked and yes, it only works vs. SSHv1 and only with certain ciphers being used. A full defense against Ettercap password sniffing is to set all sshd_config files to Protocol 2 (only 2, no 1!!) and all clients to Protocol 2 (no fallback to Proto 1). As long as the client and/or server refuse to connect with SSHv1, you cannot even be forced back (Ettercap will let you force a connection to v1 if it's supported by both ends, which is why you must use SSHv2 ONLY)

Unfortunately, most distros I have used default to SSHv1 for their server, as well as the client.

If SSH is going to be suggested over telnet, it is important to note that version 1 is just as insecure as using telnet.

If someone didn't know that there are 2 versions of SSH, and simply used what is the default configuration on their systems, they might as well write their password on a sticky note by the monitor.

oh you guys .. he asked a simple question and you started your security rant about ssh :-D.

if you really want to use telnet

1) First check if telnet is running or not. On RH this is wrapped by xinetd. Look in /etc/xinetd.d. If you've installed "workstation" then this is not installed by default. Insert CD and install the rpm.

netstat -na|grep LISTEN (look for 23 port)
or lsof -i:23

If not running then start it using "service telnet start"

2) check your /etc/hosts.allow and /etc/hosts.deny

3) Check your iptables. Allow 23 port if you've enabled firewall

Interesting read.

http://www.hackinglinuxexposed.com/a.../20020430.html