Its a combination of both. You unlock the horses for breeding by winning the DS and DC in the field of legends. It has been reported that not all the horses show up in the breeding section at least people who have earned all the stars dont have them all. The secret horse packages are unlocked every 5 stars I believe.
Im thinking of restarting a game to try something but I too have not unlocked all the stars yet and with the new league sneaking up it will have to wait until after the start of the league.