A lot of chemo drugs are toxic, aren't they? I'm actually not sure how they were located as hypotheses. Does anyone have info on this?

This is discussed to some extent in Siddhartha Mukherjee's "The Emperor of All Maladies" which is an excellent book about the history of cancer. In most cases, chemo drugs are chosen because they target a specific phenomenon that is occurring in cancer cells more commonly than it is occurring in other cells. The most common example is mitosis (since the main problem with cancer cells is that they just keep growing). This is why chemo drugs often harm cell types like immune cells and hair follicles- these cells are some of the few cells in the body that are often growing.

A historical example may be instructive. One of the first attempts at chemo was for leukemia. It was known that leukemia cells had strange mitosis behavior and distorted nuclei. So researchers tried giving folic acid to the patients since this was known to be important in cell dvision. Unfortunately, this made the leukemia even more virulent: it turned out that levels of folic acid were actually a limiting factor on how fast the cancer cells could divide. So then they tried giving them chemicals that interfered with the metabolism and processing of folic acid. This was the first set of chemo drugs that had any success (although it turned out to be always temporary: the cancer almost inevitably evolved around it).

Historically, most drugs have been identified by high-throughput screening, i.e. you purify an enzyme of interest and test billions of different chemicals against it for the desired effect. You then test for an effect in cell culture (compared to healthy cells), or you can screen directly against the cancer cells. Once you have that evidence, you test whether it has effects in mice, and only after that can you test anything in humans.

It's possible to propose a single chemical and get it right by chance, but testing a single chemical is cheap. In an already-equipped lab, the initial cell culture data will probably take a few weeks and under a thousand dollars, and after that you will have people willing to help and/or fund you. The lack of even this initial evidence is generally a good reason to believe that something doesn't work.

With regards to hypotheses, a lot of the early drugs were identified by chance - there's a description at History of cancer chemotherapy. Most of the current interest is in targeted therapy, i.e. intended to act against specific proteins involved in various types of cancer, and the starting point is the identification of that protein. Chemo drugs are a bit different since they're a very broad class (they target rapidly dividing cells in general, which is also what causes the toxicity), and the metabolic networks they affect are generally well-known, so the initial hypotheses tend to be about new ways that you can intervene in those networks. There are other approaches to the various steps as well, e.g. structure-based drug design has had some success, but not yet enough to replace the screens.

Me neither, but I doubt they just gave them random poisons on the off-chance one of them would survive.

EDIT: Seconded the request for info, incidentally.

Pun intended?

My point is that testing toxic substances on people without any reason to believe that they will have any effect beyond further damaging their health is, y'know, bad. Obviously. We don't stab people in the head to cure their personality problems, even though brain damage can and has altered peoples' personalities. Have you read HPMOR? Because Dumbledore makes a similar suggestion, but at least he has the decency to suggest something merely inconvenient.

Probably that we have a causal model of how bleach is bad for you, and a causal model of how cancer drugs can help, and bleach would just kill you. We're not evolution, we don't have to test every design before building a car.