It's not really an IMC problem as such. IMC is just passing a URL like this to the browser: telnet://X.X.X.X/ - It's up the browser to decide how it wants to handle that protocol.
Years ago IE supported it natively, then Microsoft decided that probably wasn't a good idea, and so they disabled it. You can go and get it enabled again, but it involves mucking around with the registry. It does work, but it needs to be done on every client that accesses IMC - it's not something you can do from the server itself. It can be a pain getting the right combination of registry keys.
I've had more luck with using other browsers - e.g. Firefox asks you what to do the first time it sees the telnet:// string, and it will remember your choice if you tell it to.
Have you tried using the fix outlined in the IMC "Getting Started Guide" ? What version of IE is this, and what security settings do you have on your browser?
#firefox