I know I'm a bit late to this topic (not sure how I even found it, not a frequent reader of these forums), but ...
http://rugxulo.googlepages.com/quakemak.txt
That's from my weak attempt about a year or two or three ago at compiling it. It seemed to work for me in DOSBox at the time (but I'm not a huge Quake fan, so I don't have it currently installed, honestly). A quick relook shows -O9 (eh? PGCC??) and optional -gstabs (GCC 2.8.1+). Actually, -march=pentium is probably not ideal either (although neither is the still-default -mtune=pentium, meh). Not to plug my own weird hacks too much, but a very small package of DJGPP is my own mess called djgpp203.7z (GCC 2.95.3, BinUtils 2.16.1, DJDEV 2.03p2, Gmake 3.79.1). If you don't have 7-zip, get 7zdec.zip too.
Anyways, long story short, yes it used DJGPP as they reluctantly wanted to target the DOS/Win95 market at the time (1996). They also cross-compiled it (GCC 2.7.2) from some weird platform (Alpha?). In fact, they initially wanted to use GCC as a compiler for mods / add-ons but eventually wrote their own wimpy compiler.
Quake 1 was released in 1996, developed for over a year by several people including Michael Abrash (heavy FPU optimizations biased towards Intel Pentium making Cyrix 6x86 users unhappy). It used DJGPP 2.00 beta 3 (I think) and CWSDPMI r1. Any more specific info will probably have to come from CWS himself. IIRC, he said he helped port it to work in (buggy) Win95 w/ only 16 MB RAM but NT would've needed another month (bugs that were never fixed, no support for nearptrs) so that's why it doesn't run natively in XP etc. (Same for DOS Doom re-ports, almost all of which are also dead, and only CDoom runs in WinXP for me ... and without sound). Hardware acceleration was the main killjoy for DOS games, I think (or so people claimed). Oh well.