I'm going to assume that ntlm is NT lan manager, or something like that, which, if I am remembering correctly, is the default authentication scheme for Win9X, ME and possibly NT (I'm forgetting this stuff now as I type). It seems that your telnet login is trying to authenticate you to windows (a SAM database maybe? I don't know what Win2k standalone uses) and is failing for some reason. I've never set up telnet on NT or Win2k, so I don't know what type of authentication it is looking for or what type of local accounts you need. I would poke around M$'s technet sight for a while, you will probably find some type of answer there.