Connecting to the external Domain name for a local computer would not actually take you past or even to your ISP (excluding DNS lookup). What happens is the client computer does the DNS lookup and gets the IP address for the external interface of your router. When it connects to this IP, it's connecting directly to your router, and your router is forwarding that connection back to the computer addressed in the virtual server setting. The connection wouldn't be blocked by any existing firewalls or restrictions set by your ISP, because it never goes through their servers.

If you have the capability, try setting up an SSH server, and set up your telnet session through that. As insecure as telnet is, I don't think I would want it open to anyone to access. As an added bonus though, SSH should increase the reliability of the telnet session.

but from what I've gathered so far, yes you should be able to set up that server through a SSH tunnel. You may need to get the specifics from one of the Gurus around here or get ahold of one of the manuals on SSH, but the basics are that you'll set up a SSH server (or OpenSSH or whatever is available for your system), then set up a PPP tunnel (for Linux you'd use pppd), then lastly your game server. There is a telnet client that's supposed to support SSH for Windows, so you may not have to do the same thing on the client machine.

Obviously this wouldn't be the best setup if you want Joe Offthestreet to join in by word of mouth, but it should keep Ima Hacker away.