Do you see anything in /var/log/syslog? What ftp daemon are you using? I am using proftpd. If you are using that, it looks like there is a way to run it in "standalone" mode, where stderr and stdout are dumped to the tty. I would think that between that and levels of verbosity, you should be able to figure out ftp's problem. If you are using wuftpd, you might need to check your man pages to see if there is some similar option.
BTW, all this is based upon the assumption that you are able to communicate to the outside world.
Hmmm. Another thought. Do you have your subnet mask setup correctly and the same on all the machines? Can you ping to this machine from another, and/or ping to another from this? Can you also do a traceroute to/from this machine? (Where this machine is the telnet/ftp server).
If that doesn't work, then get a utility called iptraf, and run that. It will allow you to see what all the packets that are trying to come in/go out of the adapter (eth0) that you are viewing. That will give you some more info to know whether the problem is at an application level, or at a lower, network level.
SSh is very nice. I have 6 machines on a net @ home, all connected to the internet through a NetGear RT311 NAT router. I have a designated DMZ machine where I am running SSH, and I have opened up ONLY port 22 on my Router. I can get into my DMZ via ssh, and I can copy files into/out of my home net via scp (Secure Copy over SSH). I have also set up some port forwarding over SSH, and I use
VNC over SSH to access all of my other windows machines via a virtual X server on my DMZ (It sounds confusing, and it was a bit confusing to get working. But it's nice). (Basically I run a virtual X server on display :32, forwarded to port 5904 on my work machine. That's my X. Then I can run xvncviewer <machine:0> to view my home machines behind the firewall. All this is encrypted and forwarded over the ssh link).