This is highly debatable. The first time I personally saw it was in 97, but that was hardly the first year of MMOs. It's been attributed as far back as MUDs, so I'd venture to guess both have been used nearly an equivalent amount of time.
Plus, saying "char" outloud just sounds silly to me. Probably as silly as "toon" sounds to you. We're not carebears.
So, my point still stands. Toon is just as valid, and probably as old, as "char".