i checked in my /etc/xinetd.d/ directory (yes it's a directory) and in there i have files that seem to correspond to different communication protocols (ktalk, rsync, telnet etc.) except i don't have telnet since i don't have it installed. It's inherently insecure, i would look into SSH much simpler and it's easy to set up.
If you still want telnet there is a line in the file that says "disable = yes"
change that to no and maybe it'll work