You don’t need to run systemd inside of the container in order to do this. Daemons run in containers should be invoked directly as an ENTRYPOINT.
After installation with yum install -y telnet-server, you can see a systemd service file indicating how the server is meant to be run at /usr/lib/systemd/system/telnet@.service.
[root@baf4029d2be6 /]# cat "/usr/lib/systemd/system/telnet@.service"
[Unit]
Description=Telnet Server
After=local-fs.target
[Service]
ExecStart=-/usr/sbin/in.telnetd
StandardInput=socket
You could invoke /usr/sbin/in.telnetd directly (although it looks like the dep on systemd is more hardcoded than I initially thought, relying on socket activation etc.).
There is also instructions for “Running a systemd based service” at https://hub.docker.com/_/centos/. Did you try them? I’m able to get a working telnet server running in systemd in a container fine by following the instructions there (including making the temporary bind mount dir as suggested by comments). The authentication fails when attempting a telnet, but I can clearly see the process running, so it merely needs to be configured to accept connections properly.