Under Lion I was able to press ctrl + ¨ (Swiss keyboard) in terminal and this would send the Escape character to telnet. However, this no longer works in Mountain Lion.
MacBook Air (13-inch, Mid 2012), OS X Mountain Lion (10.8.2)
I have reported this problem to Apple. Who I have been told accept that it is a defect and will be fixed.
It is however, not yet fixed in 10.8.4.
One workaround is to have a US keyboard mapping and switch to that. Then the telnet escape works.
http://www.wikihow.com/Change-Your-Input-Method-in-Max-Os-X-Lion
Another possible workaround offered by the Apple engineer was:
http://www.bueche.ch/wp/2009/01/28/telnet-escape-for-non-us-keyboard-on-os-x/
I haven't tried this method. I change the keyboard mapping (to U.S. Extended) quickly using the menu bar icon. Hopefully this problem will be fixed in the future.
Still not yet fixed in 10.8.5.
It has been fixed and is working again in 10.9.0 (Mavericks).
Telnet Escape character '^]' (in Terminal) not working in Mountain Lion
