I did not become involved in the horse racing industry until 1987, so I can't speak for how the animals were treated before then. Of course, we can look back at previous decades and see times when race horses, circus animals, or animals used in TV/Film were not treated with the care they deserved. Times change and attitudes evolve for the better, thankfully.
I do know that today most every race track in the U.S. adheres to regulations designed to protect the health, safety, and welfare of both the horse and the jockey. I'm not sure if it's a patchwork of state-mandated regulations or a single federal standard, or a mix of both. For example, here in the Midwest, the A.S.P.C.A. (American Society for the Prevention of Cruelty to Animals) has been successful in persuading tracks to cancel the day's races when frigid temperatures hit a certain low point. This includes wind-chill, but I can't recall if it is minus-10F, or minus-20F ?....not sure. Also, every track has a complete veterinary lab - including drug-testing capability - to insure fair competition. Many owners pay their own private vets to be in attendance, also. Thoroughbred race horses are constantly monitored, their diets fussed over, with regular exercise, bathing and grooming. They sleep in heated/air-conditioned stalls and these conditions are verified by people who care. That is, both the people who want to enforce animal-care standards AND the investors who want their "babies" to be in top-notch condition. I guess you could say the "caring" come from equal parts compassion and competition. Whatever the motive, they are looked after pretty well overall.
In regard to the questions of breeding, and its inherent weaknesses, you pretty much nailed it, mjp. Today's thoroughbred racehorses are so fine-tuned and evolved that they pretty much HAVE TO hit the track and let it all fly. There really is no other line of work for them. Police patrol ? Forget it. Summer camp for kids ? Kiss your kids goodbye ! These are highly-sensitive, moody, intense creatures that need to race and need to win. They have egos. They like some people and despise others. Some track employees are "permitted" to groom them and some others receive a warning kick in the air to show who's boss. You don't fuck with a champion - or a $5,000.00 backwater claimer who THINKS he's a champion !