They've been holding auditions for years, but I don't know if everyone has to do it or if it's just a simple case of "can they skate?", but also their aptitude, willingness to learn, and a bit of a screen test thrown in.
I remember the year that Chris Fountain was in it, one of the other Hollyoaks cast said that she auditioned too, but obviously they went with him instead, presumably as the better skater.
Sinitta said that she'd been trying to get on the show for years, and always failed the auditions, but I don't think it's just about who is good and who isn't. They have to get the celeb mix right, so there will be soap stars, pop stars, sports stars and tv presenters that are known to different demographics. A Hollyoaks actor will appeal to a young audience, but they are unlikely to be known to anyone who doesn't watch the show, and the same for a young Coronation Street actor, so the producers will be in a position to take their pick.
Someone like Todd Carty has broader and the nature of his fame makes him harder to replace with an equivalent other, so he could get away with being terrible, and he was terrible in a fairly amusing, entertaining way. If he'd been terrible, but really uptight about it, that would have been painful to watch. Worse, someone who throws their toys out of the cot and quits a couple of weeks into training is a waste of time for everyone.
Gareth Gates said he'd been asked to do the show each year it had been on, but he'd be well known to most of the DOI audience, so any audition was probably a formality.