Then some enterprising individual looked up hyenas (http://en.wikipedia.org/wiki/Hyena). Madness ensued. The lack of sexual dimorphism, the female pseduo-penis and anal glands led to a furry-based explosion of Gnoll perversion.
Yet Gnolls were not cast to the curb. They remain a challenge for low to mid-level players for GMs who dance around the inherent strangeness of a "hyena-like" race.
Unified Setting Description
Most inhabitants of the world place Gnolls on the bottom of whatever pyramid scheme of worth they have crafted. Gnolls are smelly, dirty, lazy, violent, murderous thieves ruled by females. Gnolls will freely admit to all of this with a laugh. They don't need the respect of other races. Other races fear the night, and Gnolls are the reason why.
Gnoll tribes control southern Vilous and most of Lindwurm from their homeland in the Mensala Badlands. They may spend the days asleep, raid other races for weapons and technology they could easily build themselves and ignore the hygiene protocols of other races. But at night nothing crosses or stays in their territory without the permission of their matriarch. Under cover of darkness their night-vision and enhanced sense of smell (allowing them to discern the position of their unwashed comrades from a kilometer away) make them unspeakably lethal. Why smelt metal and smith weapons when lesser races are so easily killed, giving up whatever treasures they possess?
Not that Gnolls are stupid. Far from it. The Gnolls of Lindwurm have learned to let caravans with a certain mark pass, as long as tribute is paid. Gnolls of Vilous earn their foreign coin by renting themselves out as mercenaries, imitating the Sergals who pioneered the idea. Next to the raptor-shark grin of Sergal spearmen, there are few sights more disheartening than the smirk of hungry Gnolls wielding weapons looted from their fallen victims.
Laughing Ones and Ghost Faces
Every race has subjects they don't talk about. The topic for gnolls would be the crazed creatures known as the Laughing Ones. Nighttime is an intoxicating time for Gnolls, and some fall victim to it. They lose control of themselves and begin tearing into whatever confronts them. Their madness allows them to ignore terrible injury, and go without food or water for weeks.
The closest thing the Gnolls have to a knightly order is the inter-tribal organization called the Ghost Faces, who take it as their duty to exterminate these menaces. They cover their faces with white clay, and notoriously never laugh. This is almost as disconcerting for the snarky Gnolls as the insane rampages of the Laughing Ones.