you shouldn't need to flash using the ext3 but it sounds like you confirmed it did boot into ext3, when I did this I had to re-do the first steps of creating eiri.conf via telnet,
and entering everything in nano, to make sure it was actually saving correctly, it's when eiri.conf is correctly saved and then you run eiri that the port was opened up for access,
basically, now that you're running ext3 you need to follow all of the instructions in the other post
although based on b-rad's reply, there may be something else going on, I had exactly the same error you have, not able to telnet to port 14247 and I solved it by running ext3.
I may play with this some more to see what's going on, but of coarse my daughters watching a movie now. at least I was smart enough to keep my ir codes I got from port 14247 so I don't have to start completely over to test things out
KAD
edit: a couple of other notes
jamiroo mentioned once that he could not get this to work using putty, don't know why and I didn't try in putty
to telnet to port telnet <wdtvlive-IP-address> 14247
and config to is config_tool -c eiri=ON
and apartently there are some remotes this does not work with, but regardless you should still be able to access the port, not all button work on my remote with this, but enough that it's very useful