When I try to get rlwrap to work inside an Emacs (version 24.3.50.1) shell buffer (either M-x shell or M-x eshell), I get this error message:
rlwrap: Oops, crashed (caught SIGFPE) - this should not have happened!
For example:
rlwrap telnet google.com 80
wors fine from a regular terminal (like xterm), but crashes from a shell inside an Emacs buffer.
Several people are having similar issue but the only "answer" I could find so far is a "RTFM" style answer on mailing lists. I did read that part of Emacs' doc and I don't understand what I'm supposed to do to make rlwrap work from within Emacs.
Try using M-xansi-term instead of shell/eshell.
shell and eshell do not provide terminal emulation functionality, but readline requires terminal emulation capabilities to move the cursor etc.