Could you clarify? Is it that you don't have root access from TELNET? Or from the actual login prompt on the server?
I suspect you are referring to getting "login incorrect" from trying to login as root to telnet.
This *IS* expected behaviour. We are trying to stop people from using telnet (note: it has been discussed to remove it from the distribution altogether in a later release now that ssh is a standard feature in the product). We added a new feature (see the release notes on the developers' site -
http://www.e-smith.org/article.php3&mode=threaded&order=0) that restricts administrative access over telnet/ssh.
Our default is to disable that administrative access to prevent people from just guessing its password all day long, and that goes for both upgrades and installations.
To change this behaviour, go to the remote access panel in the e-smith manager and change telnet administrative access = 'yes'. Then you'll be able to login as root from telnet. Though I recommend you start to learn ssh as in later distributions we may deprecate telnet completely.
We have never heard a report whereby one can no longer access the machine as root from the actual console (only from remote administration), but if this is the case, please report your findings to bugs@e-smtih.com.
Thanks,
Jay