Java terminal emulator

Have a look at the JediTerm project: https://github.com/JetBrains/jediterm

It has both graphical implementation as well as API to override. Graphical version works for remote SSH connections(using JSch) and local pty(using Pty4J).

It is a mature project used for the embedded terminal in JetBrains products.

Telnetd seems to be a complete and pretty well documented solution:

http://telnetd.sourceforge.net/

You can also try:

http://www.jcraft.com/jcterm/

It behaves like a VT100 and uses a SSH2 connection. But the website indicates the VT100 emulation is incomplete.