Lets see what I can help with. Everything you do to get the '#' prompt looks good.
The reason you are getting the '#' prompt right away is because by default there is no password for the root account. If you want to get a password set (which I would recommend because ftp will not work without a password), type 'passwd' at the '#' prompt. You may then enter a password of your choosing. After this, when you telnet, you will be prompted for the password you just set.
Onward... So you know that '#' is the command prompt.
Now we are straying into a hijack of the thread because we know that you can log in as root. I too am a firmware noob, so I do not understand why you would be telneting to the WD to look at your moviesheets. From the commands that you say you have tried, it looks like they are on your USB attached device, so you could just plug that into the PC and check them out. But, perhaps I have no idea what I am talking about.
It looks like your movie sheets are in a folder names msheets on the USB device.
Firstly, you are using the wrong 'slash' for linux. you need to use '/'
do a 'df' command to see where the USB device is mounted (most likely /tmp/media/usb/<some weird numbers>/USB1).
Assuming that the path looks like that, you will typ:
cd /tmp/media/usb/<some weird numbers>/USB1/msheets
the 'ls' command will show you a listing of the directory.
What you do at that point is up to you because I am not certain what you are trying to do. Dont fall into the trap I hit. make sure your names do not have single quote characters in them.