I recent upgraded to Windows 7 and found that telnet is not installed by default. Follow these instructions from Microsoft TechNet below and see if it solves your issue. Worked like a charm for me.
To install Telnet Client on Windows 7 or Windows Vista
1.Click Start, and then click Control Panel.
2.On the Control Panel Home page, click Programs.
3.In the Programs and Features section, click Turn Windows features on or off.
4.If the User Account Control dialog box appears, confirm that the action it displays is what you want, and then click Continue.
5.In the Windows Features list, select Telnet Client, and then click OK.