Demonstration of success:

exarkun@boson:~$ telnet localhost 56197
Trying ::1...
Trying 127.0.0.1...
Connected to localhost.
Escape character is '^]'.

telnet.ShellFactory
Twisted 1.2.0
username: admin
password: *****
>>> import os
>>> os
<module 'os' from '/usr/lib/python2.3/os.pyc'>
>>> os.getpid()
22749
>>> os
<module 'os' from '/usr/lib/python2.2/os.pyc'>
>>> os.getpid()
22762
>>> Connection closed by foreign host.

Interpretation is left as an exercise for the reader. Suffice it to say that all the dirty hacks in the server melted away tonight, and the transition from supporting only listening ports to supporting connected protocol instances was almost effortless. The interpreter version change was a last minute afterthought that I was happily surprised to see actually work.