Bash!

Freedom!

I've been running telnetd on android for a while now, and the busybox shell sucks for obvious reasons - it's not meant to be a fully featured shell.  Luckily, there's bash.  I've been using bash on linux for years and I was stoked to find it for android. 

You can download it here.  Or use Fission ROM manager to download it.

Once you have the file downloaded, copy it to /system/bin, and make sure that permission is set properly.  And instead of using /system/bin/sh for telnetd you can use /system/bin/bash.  So your full telnetd command would look something like this:

su -c 'telnetd -l /system/bin/bash -F'

The above command runs as a sl4a script on my Droid X - super convenient this way.

To exprience the awesomeness of bash, try typing a partial command or directory and hit Tab, try hitting up and down arrow, and Ctrl-A & Ctrl-R.  Oh, and adb sucks. ;)