I am running OSX 10.6, and noticed the following with SAN-OS 3.3. It like automatically sends the logname with the telnet request (I think), so it prompts you for password, then you just hit return and can get a login prompt and login. The reason I say it sends the LOGNAME is because if I look at ACS its showing that's what is being sent. Could be an OSX thing but I just found it wierd. Incidently I can login to some Cisco routers from my OSX box and i don't have this happen, so something between OSX and MDS.
Cluebox:~ bfeeny$ telnet 172.16.3.151
Connected to 172.16.3.151.
Escape character is '^]'.
MDS1 login: admin
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