Apple doesn't provide a simple way to enable telnet logins on port 23. This is probably because telnet is not nearly as secure as ssh, which uses port 22 (and which is easily enabled with a check box in the System Preferences).
If you really want telnet enabled on your box, you'll have to edit your /etc/inetd.conf and restart the inetd daemon.
Better to enable ssh ('remote login' in 10.2's Sharing Prefs) and use ssh instead of telnet.