No one knows where Dong Hai Chuan learned baguazhang. He claimed to have run across a Taoist monk while wandering in the mountains. Some people believe he just made it up based on some circle-walking meditation he had practiced.
Although he created the art in the 1800's, he was apparently vague about it's origin. There's nothing vague about the skill of his students, however, although as we all know, stories tend to be exaggerated over time.
I always get a bit tickled over anecdotes that say a master knocked a guy "about twenty feet" with very little effort. That seems to be a consistent measure that pops up in martial anecdotes. That's a pretty long way to knock someone (I don't think I've ever knocked anyone 20 feet).
It's interesting to read that Dong Hai Chuan made one student walk the circle for six months before teaching him anything else. On the other hand, when he was enthusiastic about a student, such as Yin Fu, the student could master the art in just a few months.
Can you imagine an American student walking the circle for six months? Most of us want to blaze through the curriculum, and as a result, our circle walking isn't as good as it should be. In fact, if there's one thing that we can take from the old tales of martial arts masters, it's the concept of focus and constant training. They had focus, they trained constantly, and their skill grew.
For a good book on baguazhang, follow this link.