Re: Putty and SSH via telnet gateway

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It ignores them, and always has. (Apart from anything else, it can't
reliably distinguish the boundary between the `telnet>' prompt and
the `Trying' message after it, so it has to be able to ignore any
amount of rubbish.)

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That sounds like a plausible cause of the problem. `Out of memory'
is often PuTTY's response to a corrupted data stream (see the
section about this error message in the manual). If you were to have
any way to investigate the 8-bit properties of your gateway and
determine in precisely what way it fails to be 8-bit clean, I might
be willing to build in compensation code in PuTTY's proxy
Simon Tatham         "loop, infinite _see_ infinite loop"

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