Yes, you can configure AlphaVM to use any terminal emulator the configuration property sheets for serial ports. By default PuTTY is configured.
Please note that a terminal emulator can only be launched by the Windows GUI Launcher (EmuLaunch). The VM itself ignores the launching settings.
Please also note that AlphaVM serial lines are raw in the sense that there is no protocol over TCPIP that is operating on these lines (like TELNET). This is why PuTTY is configured in raw mode. It is incorrect to use a TELNET client with the console. You can still use your TELNET client to connect to AlphaVM via network.