My favorite definition of toe rag is #3....
1.The definition derives from old England where convicts used to tie bits of shirt around their toes and feet as a make shift sock, hence "toe rag" means scoundrel, criminal, thief, indencent/unlawful person etc. It is sometiem seen spelt Tow Rag because the original context has long since been obsolete.
2. A useless person, often characterized by unpleasant demeanour. Derivation: the subject is about as high up the social ladder as a rag used for cleaning toe jam out from between your toes.
3. It was originally a piece of rope used by people on boats to wipe their rear ends. It was hung outside the boat in the water and when it was needed it would be pulled in and used.