Have textbook writers really read all the literature in their bibliography?
Yes, an author will presumably have read all the material, but not "in the preparation of the book". Typically, if you write a book, you already are in expert in the area and you have read, at one point or another, most of the seminal work in your field, so you don't need to read everything in detail again when writing the book.

I should also point out that "hundreds of sources" really isn't that much. I am a comparatively junior researcher, and my "standard bibtex file" which contains papers I regularly cite already contains multiple hundred entries (and of course I have read all of these at some point - not always in great depth, though).