TCP wrapper telnet breakage?

[cbarry@2xtreme.net (Christopher R. Barry)]

Ever since I did some major upgrading of my Debian box to potato,
telnet seems to be screwed, though it is configured properly and
worked before. It's the classic problem:

  bash-2.02$ telnet localhost
  Trying 192.42.172.1...
  Connected to HAL.
  Escape character is '^]'.
  Connection closed by foreign host.

There is a 2 second hang or so before the Connection closed
message. Ftp is working perfectly. In /etc/services I have:

telnet          23/tcp

In /etc/hosts.allow (redundant, but just making sure)

ALL: 127.0.0.1 
ALL: localhost 
ALL: HAL

In /etc/inetd.conf

telnet          stream  tcp     nowait  root    /usr/sbin/tcpd  /usr/sbin/in.telnetd

I've rebooted just to make sure things were right. So what's up?

Christopher