There are certainly legitimate uses for a telnet client, server, or wrapper. However, that's not what this person asked for. They want a "fake telnet client" that will take the username and password, then give a false error message and log the username and password.
I have yet to hear of a single legitimate use for such a program. I can think of only one purpose; to log usernames and passwords without user knowledge. A legitimate administrator has no need for such tools; in *nix, this information can be logged, while in Windows, the administrator can determine the user passwords with ease.
So, then - under what circumstances does this become a legitimate use?
- email Ozymandias