Actually, the 'with command' parameter id deprecated and should no longer be used. While it does still work now, it may not in future versions.
The 'correct' way is simply:
Code:
tell application "Terminal"
do script "telnet 1.2.3.4" -- or whatever IP address
end tell
The alternative is to save a terminal session and open that directly.
Use File -> New Command to execute a terminal command in a new window (in this case, your telnet command). Set the window settings, size, colors, etc. to whatever you want, then save the window (File -> Save).
The resulting .term file will contain all the parameters about that window, including position, size, colors, etc, and the fact that the telnet command was used to initiate it. You can then open that .term file and reset all those options:
Code:
tell application "Finder"
open "path:to:file.term" using application "Terminal"
end tell
viola.
If you save the .term file in ~/Library/Application Support/Terminal/ it'll be available in the Terminal's File -> Library menu for quick access, too.