If I remember, the fell beasts were found by Sauron in 'Mountains under the moon' and nurtured on 'fell meats' until they grew to the gigantic size necessary for use by the Nazgul. I've always imagined them as similar to Pterodactyls but bigger and spikier.
The mountains concerned could be near Minas Morgul (having been Minas Itil - tower of the moon) though i favour the Mountains of Mirkwood as in Frodo's vision on Amon Hen he saw the strife of men and elves and 'fell beasts' in Mirkwood. Though of course fell beasts could refer to giant spiders, orcs etc.
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Rumil of Coedhirion
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