> > displays nothing and waits until i press CTRL-C.
> > echo $TERM shows xterm (from which telnet was started).
> 
> I don't use emacs. But maybe try:
>  emacs -nw
works fine.
i did not know that netbsd telnet passes DISPLAY variable to remote
session and even change it (to hostname:0 from :0)
it's very good :)