Sounds like the telnetd is not 8-bit clean. 

  I usually have better luck running uucico directly from inetd:

uucp    stream  tcp     nowait  uucp    /usr/libexec/uucp/uucico /usr/libexec/uucp/uucico         -l 

  This has the benefit of splitting out your uucp accounts from /etc/passwd
into /etc/uucp/passwd.
 

] Train travel features AC outlets with no take-off restrictions|  firewalls  [
]   Michael Richardson, Sandelman Software Works, Ottawa, ON    |net architect[
] mcr@sandelman.ottawa.on.ca http://www.sandelman.ottawa.on.ca/ |device driver[
] panic("Just another NetBSD/notebook using, kernel hacking, security guy");  [