So, on your first point, did the concept of hell arise from within "God's Word" or from other sources and then get incorporated into Judaism?
As a believer in Jesus, I believe that Jesus and the apostles give us a view of hell in the New Testament that arises from direct divine revelation. I also see nothing in the Old Testament that would conflict with what we find in the New Testament concerning this.
And, did Christians build on the concept and develop it more, and then, go back into the Jewish Scriptures to find verses they could use to prove their point?
Jesus speaks of hell when talking to the Rabbis as though it is something they are aware of: Matthew 23:33
John the Baptist may also be alluding to this in Matthew 3:7
I believe it's clear, based on apocryphal and rabbinical sources, that 1st century Jews had an understanding of an afterlife that involved a place where the wicked went that involved torment; and that this understanding did not rely on just what the old testament says.
I believe at some point there had to be some genuine prophetic revelation to the Jewish people about this prior to Messiah. Some of that genuine tradition may be preserved for us to some extent in apocryphal writings or Rabbincal tradition, but I would not look to those as authoritative standards on what the nature of the afterlife really is. I would let the OT and NT be the rule by which I judge the potential for truth found in extra-biblical writings, not the other way around.
On your second point, the Bible has been trying to put the "fear" of a wrathful God into people from the beginning. He cursed people, drowned them, burned them, had his people kill other people, had his own people kill off some of their own and on and on. Actually, that sounds scarier... what if he still threw down lighting bolts whenever a person sinned? I'll tell you what, I'd be scared. But some vague concept that has a hundred different interpretations, and might be something made up anyway? That's not all that scary.
Your characterization of the Bible and God is inaccurate.
God's first action after the fall of man is to cover their sin and make a promise of redemption through their offspring that will defeat the serpent. He doesn't make a promise of condemnation to man and demand obedience as a result.
It is God's mercy, love, and kindness that he does not strike down everyone the moment they sin - otherwise we would all not be here.
The old testament is full of God's love.
Just a few examples:
Job 10:12
Nehemiah 9:31-32
Psalm 57:10
Psalm 86:15
Jeremiah 9:23-24
Isaiah 54:8-10
Lamentations 3:32
Jonah 4:2
Micah 7:18-20
Hosea 14:4
The message of the Bible is all about God's promise to redeem mankind from their sin and condemnation to bring them into God's life and blessings; from Adam to Abraham to Moses to Jesus it is the same story. It's not a story of simply demanding obedience through fear.
In fact, in Romans 2:4 we see that God's goodness is meant to lead us to turn away from our evil deeds.
However, God's justice is real, and we would do well to fear the consequences of being judged by God:
Daniel 12:2
John 5:28-29
Revelation 20:12-13
Ecclesiastes 12:13-14
It would also be wrong to think of God's justice as wrong or bad. God's justice is a good thing. Any society which did not punish those who committed evil acts against others would be seen as an evil society,
It would also be a wrong understanding of the Bible to not realize that it is God's expressed desire that we would experience His redemption: 1 Timothy 2:3-4, 2 Peter 3:9, Matthew 23:37
To that end; Jesus is God's promised provision for us, removing our sin by his sacrifice on our behalf; if we will choose to trust in Him and walk with Him.