Ok, but no one uses telnetd, right?
For instance...with an SSH client, the first time you contact a new server you're asked to verify the remote host's identity. I bet most of us just blindly type 'y' at this point despite the security implications. On the other hand, with SSL, you can have the server cert signed by a CA the client trusts.
No. Telnet is heavily used in industrial environments.
I guess that's partly due to memory footprint, or assumed memory footprint (dropbear being fairly small), by the manufacturers, and partly due to windows not having a ssh client by default, whereas every major OS comes with a telnet client.