Hi,
I don't know if it's still true with MQX4.1, but with MQX3.4 and MQX3.7, the IO_IOCTL_SERIAL_SET_FLAGS ioctl was only working for the serial line, but not when connected to the shell from a remote machine through the MQX TELNET server.
I had to fix that to implement a login password with echo disabled (for obvious reasons), and to add some more professional class features to the shell prompt such as history, command recall, command line edition, ...
See this post for more info, if needed : Unprofessional Shell behavior