The telnet socket is returning lines that contain no (0) characters. It seems that /aline doesn't like adding blank lines to windows. To solve this, all I did was transform null lines into something that mIRC accepts, but still looks blank (2 ctrl+b in this case).

Code:
on *:sockread:telnet: {
  sockread %hd.info
  %hd.info = $ansi2mirc(%hd.info)
  aline 15 @telnet $iif($len(%hd.info),%hd.info,)
}


Also, you should consider adding code to close the socket or cancel connection if the previous socket is still open. At present, if you try to connect twice, it gives a socket in use message.

-genius_at_work