ssh in linux

In your inetd.conf file, I assume that you have deleted the telnet line. You probably should have just commented it out (put a # at the beginning). If you then want to re-activate the telnet server, you can just remove the #. If you have deleted the line, just type in (on a blank line) "telnet stream tcp nowait root /usr/sbin/tcpd in.telnetd" with out the quotes. You may want to put in tabs where the spaces are, but it is not important.

You can do the same thing for ssh, but I'm not exactly sure what the line is. Read the man page for sshd.

In addition to my above answer.... don't forget to reset the inetd after changing the config file.

Do this be either restarting linux, or issuing a SIGHUP to inetd by using...

kill -HUP {inetd PID}

This does not kill inetd, only asks it to re-read it's config files

Are you using kerberos? RSA?

Have you generated the right private/public keys?

Did you remember not to put a passphrase on the host private key?

bravo on your choice to go with ssh
as far as wanting to turn telnet on again why :) stick to ssh.

As far as starting ssh i dont use inetd.conf to start it i set it in my /etc/rc.d/rc.inet2 file which contains the following lines

if [ -x /usr/local/sbin/sshd ]; then
echo -n " sshd"
/usr/local/sbin/sshd
elif [ -x /usr/sbin/sshd ]; then
echo -n " sshd"
/usr/sbin/sshd
fi

What this line will do is look in the most common places it is installed to and if found start it.

Ifyou wish to turn telnet back on and have deleted the line for it out of your /etc/inetd.conf here is the line you will need to reenter (If you get ssh up and running I in all honestly dont recommend turning telnet back on though).

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

Secure shell uses port 22 and telnet uses port 23. So why are you still interested in running telnet? You can find some information on how to install and setup a recent and secure version of secure shell at:
http://ctdp.homestead.com/fines/os/linux/usersguide/index.html
Item 57. The Linux web links section in the security category has weblinks to where you can get ssh.

You may still have login problems since the hack may have messed up your login program, /etc/passwd file, or even your PAM files used for security authentication. I'd backup useful files and reinstall the system after a hack. Some of your programs may even contain or be Trojans. It's possible your telnet daemon or /usr/sbin/in.telnetd file has been modified since you can login locally but not remotely. You may want to check it and possibly reload/replace it.