Judging from the Telnet messages you saw, you're at least halfway there. You are opening the port and transmitting data.
If you're trying to loop the data back into the KRC2, simply connecting the Rx and Tx lines on the RS-232 port may not be enough. Check this link:
http://www.airborn.com.au/rs232.html
Partway down the page, there is a diagram for a DB9 "Loopback Test Plug". This wires the handshaking lines together as well as the Tx and Rx lines. I've found in the past with some RS232 setups that you need those lines wired in order to get the port to work properly.
I've never used the Loopback plug on a KRC, but since the KRC serial ports are the same as a PC serial port, this should work.
The other thing you can try is to create a full 9-pin "Null Modem" cable, as shown on that web page, and connect your KRC to another PC. Using Hyperterminal on the other PC, if the settings are correct, you should see what the KRC sends, and should be able to type in text and see it received in the Telnet window on the KRC.