I doubt that there is any documentation on how the first typewriter faces were chosen, but it is reasonable to presume that the choice reflected current trends in metal typography, as seen in this photo of the Hansen Writing Ball, the first commercially-available machine.

Why so ugly? One-word answer: monospacing.

There were a wide varieties of choices of type both within and across manufacturers. ATF specimen books of the early twentieth century regularly featured a dozen or more typewriter-emulation typefaces.

The main issue, indeed, is that the letters were designed so as to compensate for the fact that they were monospaced. Over the years, designers got more practiced at dealing with that, and more attractive typewriter typestyles were developed, that more closely approximated the look of printing types, like Diplomat and Bookface Academic for the Selectric.

But the first people who invented typewriters couldn't afford to go out and hire a professional type designer.

@oldnick: I see it again: the discussion of type of typewriters tends to be replaced by the discussion of type on the keycaps…

I still have some doubt about the principal reason for ugliness being the monowidth. For example, Cyrillic is more-or-less monowidth with most any font, but the ugliness of typewriter fonts is still there.

I was thinking to assume the very first ones, the prototypes, were just punches, or type, from a relatively even-bodied font, trimmed and affixed onto hammers. If something was too wide, then they found something narrower from any font, or had someone engrave the few wide characters on narrower widths. In production, I think they had in-house engravers to cut punches for striking into molds containing hammer and letter in one piece. The designs usually look to have come from softened letterpress designs in monospaced versions.

"why so ugly? Is it to hide unreliable positioning of letters on the line? (And, in pre-electric times, variable strike force?)"

I think "ugly", "unreliable positioning" and "variable strike force" in typewriting are only seen that way in our time. In their time, one kept and used their machine as well as they could, and people lived with the results until it was time for a new writing partner or a new typewriter.