For chaining telnet sessions like your trying, you'll have to find a commandline telnet client, so you can use it on the command line. Windows 2k and XP come with this standard.

Not sure why it won't start right. It's a bad idea however you manage to do it. There's no security whatsoever. You should look into openssh and such. I don't know if they have a server for windows. Maybe you could work something out with cygwin.