Someone should write a patch to fix that. There is no reason why the telnet protocol can't be used over UNIX domain sockets.
As you note, telnet has some advantages over socat/netcat/etc, e.g. the Negotiate About Window Size (NAWS) option can be used to notify terminal resize events (SIGWINCH).
One could also register and implement a telnet authentication type [1] to trigger authentication via SCM_CREDENTIALS. The server could use this to confirm the client has the expected UID/GID.
busybox telnet and busybox telnetd both support Unix domain sockets. As in this example:
sudo busybox telnetd -b local:/telnetd.sock
busybox telnet local:/telnetd.sock
Then you can log in over telnet over Unix domain socket.
HOWEVER, this only works if busybox is built with CONFIG_FEATURE_UNIX_LOCAL=y. And normally, busybox isn't built with that enabled. It is one of the few features which "make defconfig" doesn't enable.
I wonder if busybox devs could be convinced to change defconfig to set CONFIG_FEATURE_UNIX_LOCAL=y? Their FAQ [1] says defconfig "enables all functionality except special purpose things like selinux or debugging support which would reduce the portability of the resulting binary". I don't think AF_UNIX/AF_LOCAL is really a "special purpose thing". (CONFIG_FEATURE_UNIX_LOCAL turns on AF_UNIX support for all relevant busybox networking commands, it isn't telnet specific.)
Of course, their telnet client doesn't support my SCM_CREDENTIALS as a telnet auth option idea either. The busybox code is reasonably clean so it wouldn't be hard to add it to their telnet client, even their telnetd just for testing (can't say the same for netkit-telnet, which is default telnet client/server on Debian/Ubuntu). Not sure if the busybox developers would be willing to accept such a random feature though.
PS: telnet/telnetd in Alpine Linux are compiled with CONFIG_FEATURE_UNIX_LOCAL=y. However, the default busybox in Alpine 3.7 and above doesn't include telnet/telnetd. You can install them though with "apk add busybox-extras"
PPS: on macOS, Homebrew's telnet also supports telnet to Unix domain sockets, e.g. telnet /tmp/telnetd.sock.
Someone should write a patch to fix that. There is no reason why the telnet protocol can't be used over UNIX domain sockets.
As you note, telnet has some advantages over socat/netcat/etc, e.g. the Negotiate About Window Size (NAWS) option can be used to notify terminal resize events (SIGWINCH).
One could also register and implement a telnet authentication type [1] to trigger authentication via SCM_CREDENTIALS. The server could use this to confirm the client has the expected UID/GID.
[1] https://www.iana.org/assignments/telnet-options/telnet-optio...