The telnet should be 8-bit clean; you
may want to try connecting the PC
directly to the 3640 to verify if this
is an IOS issue or a modem issue.
You might also try the /stream option,
if possible. This will prevent all
telnet negotiations (but since you are
connecting to port 10300 this may not
be a problem), but with the /stream
option we should use 8-bit data too.