[aftbit]

Neat! I noticed it seems to crash when I open telnet in a fullscreen terminal (alacritty on 2560x1440), but if I make terminal half-width, it works. I didn't realize you could pass mouse control over telnet - need to read some code now! Good hack.

[justusthane]

Mouse movement is signaled in the terminal via ANSI escape sequences, which are just in-band character sequences which your terminal is smart enough not to display, so Telnet itself doesn’t actually have anything to do with it. As far as Telnet knows, they aren’t different from any other characters.

[JdeBP]

There are some oddities in the telnet version, such as it conflating XTerm and PuTTY, and it presenting a bizarre timeout message when presented with a blank TERM environment variable. I wouldn't be surprised if it somehow thinks that NVTs cannot have more than 256 columns.

Alas, that's the part that has no source available. (The TELNET server class library has published source, buried in a hyperlink in a comment to a closed issue from 2019, but the actual program built to use that library has not.)