BIG-IP 1600 - Telnet to VIRTUAL SERVER is not working but PING is fine

ICMP and telnet are 2 diff things. If it pings it does not mean telnet should work. Are u looking for any particular port that you want to assign to this VS? Go ahead assign that port and if the telnet does not work then most likely it must be your firewall rules that needs to be checked. To confirm this...telnet to a port lets say 80...Assign 80 as the service port to the VS. Open a second SSH session and do a tcpdump to collect the packet capture...

tcpdump -nni 0.0 host and port 80 -vv.

When u telnet do you see any traffic? let me know.