I had the same problem in a Win 7 Ultimate, running in a VirtualBox VM, with Linux Mint 8 as host. After reading some answers here, I just added the default gateway to my static IP in Win 7 and set it to be the IP address of the VirtualBox adapter in my host OS. And that was it... It just worked and I was able to change that "Unidentified Network" that was bugging me...
Unless you really need telnet for some unusual reason, don't use telnet for this.
SSH can provide the same environment, but provides encryption and plenty of other useful features. Telnet on the other hand provides no security at all, passwords are sent in plain text. Certainly, I wouldn't even consider allowing telnet outside of a home lan or other secure network.
Various windows ssh clients are avaliable, putty being one of the more popular ones. It doesn't require any installation or admin privileges to use.
All linux distros will come with an ssh server, although some (like ubuntu) won't install it by default. Installing the ssh server packaged by your distro will generally do all the setup for you, there's no manual configuration required unless you want to change the default settings (usually, to add stuff like security restrictions). There's already a few questions on SF about how to secure your ssh server.
Telnet servers should also be available packaged for your distro, but, please strongly consider the alternatives before choosing that option.
Best Answer
Not sure if things have changed with Windows 7 but on XP you could just do something like this.
route add 0.0.0.0 mask 0.0.0.0 192.168.0.1