The telnet-read_until does not read the pattern and returns b'' for 
line 15 in the file given.

Try using telnetlib.py from python3.1.  It fixes issues in telnet out of
band negotiations.  

http://svn.python.org/projects/python/branches/py3k/Lib/telnetlib.py

Here is what I think is happening:
HOST: b'User' + IAC + ECHO + DONT + b'name:\nPassword\n:'
read_until: times out on Username match, returns all HOST text so far.
You: *send username*
HOST: >
read_until: times out on Password match, returns '>'
You: *send password*
read_until: times out on '>' match, returns ''

This is the only way I could repeat the problem using a local Echo server.

Please let me know if using the telnetlib.py from 3.1 works for you.

Thanks for your support.
But the telnetlib from 3.1 also behaves in the same way. "read_until" 
always times out and returns b''. The problem seems to be with the byte 
string expected. The string after letter b is not passed properly.

Hi, 
I head same problem on 3.0 and 3.1 versions
This was because of incompatibility of types in comparison 

My solution is to modify 
Lib/telnetlib.py   
line  462
cmd = self.iacseq[1]
 to 
cmd = self.iacseq[1:2]

Irek

Thanks Irek. It works so well now after I modified the telnetlib.py as
you suggested. I also added decode('ascii') with read_until.

Pal Subbiah

fixed in r74217

My thanks to everyone who contributed to this bug.  "irek" if you let me
know your name I'll add it to Misc/ACKS as well.

PS, The additional testcase is not ideal;  it tests the bad behavior by
hooking into the debug output instead of testing the bug directly.

Hi,
I updated my profile with name - Irek Wlizlo

Thanks for the update Irek (and the help!). You are now listed in Misc/ACKS.