Hi Indris
I suggest you re-type those telnet credentials in again using DCR manager.
Then make sure of the following: make sure that the switch has a vlan.dat file on its flash. type "dir" to check what files are in flash or bootflash.
Then you need to make sure tftp isn't blocked between the switch and the LMS server. you can test this by manually issueing a tftp command to copy the the vlan.dat file to LMS on the switch CLI. It will look something like this:
DR-LAB#copy flash:vlan.dat tftp
Address or name of remote host []? 172.24.166.4
Destination filename [vlan.dat]?
!!
676 bytes copied in 0.009 secs (75111 bytes/sec)
Also make sure you have created an empty vlan.dat file in the NMSROOT/tftpboot folder on LMS. Hope this helps.