Sounds like your doing everything right. I don't know what else to tell you. I don't think reinitializing the VM will help.
1200
8/N/1
This is right out of the book.
Using an RS-232 terminal
The RS-232 terminal (or terminal emulation program) is used to access the Flash
Terminal Administration menus. These menus provide option lists, where you can
select different options that allow you to change configuration settings. Some
configuration tasks require a terminal. Other configuration tasks can be performed
using an M7310 or M7324 telephone. The diagnostic procedures throughout this
guide show you how to use the RS-232 terminal to configure a Flash system. If you
want to perform configuration tasks using an M7310 or M7324 telephone, refer to
the Flash Set Up and Operation Guide or the Flash ACD Set Up and Operation
Guide.
Before you can use an RS-232 terminal, it must have the same communication
settings as the Flash module. To determine the terminal communication parameters,
refer to the user manual that came with the RS-232 terminal. The Flash
communication parameters are:
• 1200 baud
• 8 data bits
• 1 stop bit
• no parity
Set the terminal communication parameters to these values. For instructions, refer
to the terminal operating manual. When configuring the terminal, Flash supports carriage return.
Important: Your terminal must be VT100 compatible and must support the VT100
National Character set. If the terminal does not support the National Character set,
text will be incorrectly presented.