The group of people who play MUDs "traditionally" (with a dedicated, telnet-based MUD client) is small and shrinking every year.
The group of people who play lo-fi, retro-style games is large and growing every year.
Why give special treatment to the former group if it hinders your ability to appeal to the latter group?
It should be no more restrictive than the concept of supporting text rendering at all--which maybe want to be able to avoid?--as, worst case, you could literally just run a text client on a server on behalf of the user.
Now, this is not a hard requirement of the telnet protocol, for sure. ANSI controls exist, as do various sub-protocols, but support for these is mixed across telnet clients and therefore can't be relied on (unless you're willing to say your game can only be played by a subset of telnet clients, I suppose).
I believe that MUD developers' fixation on telnet support has been a major contributor[0] to the ongoing decline in popularity of MUDs over the last decade. It's a terrible protocol on which to build a multiplayer game. Supporting it as an option requires some kind of server-side content rendering layer which can be inherently restrictive to your other client offerings.
[0] There are others, yes. Particularly licensing issues and gameplay norms.