A couple quick basics:
It is difficult to quench harden mild steel. As Grant mentioned, what you used for making the chisel most likely was NOT mild steel.
As you increase the alloy content of steel (including carbon), the ability to quench harden increases. The general concept is that alloying elements such as Cr determine how easy it is to quench harden and the amount of carbon almost exclusively determines how hard it will be when it is quenched.
As Grant mentioned, there are different tool steels that are rated by what is needed as the quenching medium (water, oil, air) to achieve the "full" hardness. An increase in the alloying elements (including carbon) increases the ability to quench using "slower" quench media (going from water, which produces the fastest cooling rates, to oil to air, which is obviously the slowest cooling rate). In other words, a steel with a low alloy content and realtively low carbon content will require a full water quench in order to harden it. As the alloy content is increased, then a fully hardened structure can be obtained with a slower quench in oil and, if enough alloying elements are added, it may actually fully harden with just air cooling.
Some examples: Tool steel W-1 requires water quenching to fully harden. It has a carbon content of about 1.0% C, which is MUCH higher than mild steel (typically 0.30 % C or less) but almost no other alloying elements. Tool steel O-1 can use oil quenching to fully harden. It also has a carbon content of almost 1.0% C but also has about 0.5% Cr and some other alloys (e.g. 0.5% W). Tool steel A-2 will fully harden with just air cooling. It also has about 1.0% C but uses about 5.0% Cr and 1.0% Mo. (see the designation code? W-x for water quenching steels, O-x for oil-quenching steel, and A-x for air quenching steels)
Note that these three tool steels have about the same carbon content. Therefore, as a general approximation, the maximum attainable hardness will be the same for all three materials. It is just that the O-1 and A-2 can achieve this maximum hardness with much slower cooling rates.
Of course, there are some other reasons for having the different alloys (it costs a lot more for the higher alloy materials, higher alloy materials will retain their hardness at elevated temperatures, etc.)
It is desirable to use the slowest cooling media possible (i.e. to use oil rather than water) IF the desired hardness can be achieved because quenching introduces a lot of internal residual stresses and can lead to cracking. The more complex the shape and the more there are differences in sections thickensses, the more desireable it is to have a slower quench rate. Using the higher alloyed steels (e.g. O-1 or A-2) allow the fabricator to achieve the required hardness without resorting to excessive quench rates. So, it is preferable to use an oil quench rather than a water quench if you can get the hardness you want.
What about sand cooling or vermiculite or ashes? This for situations where you do NOT want the component to harden. You are trying to keep the cooling rate as slow as possible to make the piece as soft as possible or keep it from cracking (due to heat-generated internal residual stresses). Someone mentioned cast iron. A very brittle material that is very prone to cracking from heat-induced thernal stresses. Slow cooling is desirable for this type of material.
I am sure there are a lot of newsgroup participants that make knive blades or their own tools that can add a lot of details and practical information about this.
Regards