I couldn’t decide where to post this, as Dex’s article some time back was about the word “ahoy” and only spoke about “hello” tangentially. There have been threads about the question, and most have answered it about as well as possible, taking it back to 1883 and Edison.
But Professor Allen Koenigsberg, whom Dex mentions in the Staff Report on ahoy, has done even more research and finally found what appears to be the smoking gun.
http://www.collectorcafe.com/article_archive.asp?article=800&id=1508 (part I)
http://www.collectorcafe.com/article_archive.asp?article=800&id=1507(part II)
Koenigsberg found not only a journal which indicates that delegates to a telephone convention in 1880 were wearing badges which said “hello”, but also a letter(1877) from Edison saying that a “call bell” wouldn’t be needed as “hello” could be heard up to ten feet away.
Edison almost certainly was using his version of the word “halloo” or “hullo.” Perhaps his hearing problems caused him to do so.
Mods: I didn’t know exactly what to do with this, but thought that GQ made the most sense as people might search here if they were looking for an answer. Move it if it seems important.