i highly suggest you take a look at the documentation for zones under docs.sun.com.
the setup of zones is very easy. however, you do need to plan. resources will be shared (mem, cpu, disk) so this is something to consider. also, you will essentially be running 5 servers (with your current setup) on one physical machine. hardware issues could bring your dev team to a halt. you may consider an upgrade from the v240 you have. if you have a spare box, do some testing. work out your kinks and find what fits for you before you roll it out to production. i've found happy clients (programmers) make for a better day for an admin!
i have done this many times and it has worked beautifully.
telnet,rlogin,rsh shouldn't matter as long as you are within your intranet. we are a major financial institution and use those as well... but we are also behind several layers of firewalls