Lele is the resident caterpillar expert around here, and I'm sure she can provide a more comprehensive response than mine.
But the simple answer is: yes, there are many caterpillars out there that are toxic. Obviously, their toxicity with regards to chameleons has not been completely studied. For instance, your caterpillar in Illinois might be toxic to birds in the area, but how does it affect a chameleon from Madagascar? No one has answered all these questions, and I don't think it would be safe for you to try test it out on your pet.
Also, in nature, warning colours (such as orange, red, black and yellow) are used to notify other creatures that the caterpillar might be toxic to eat. So the one you have certainly sounds a bit dodgy.
Another reason most people wouldn't feed that caterpillar to their chams is the fact that it is hairy: that could irritate the mouth and/or throat of the cham.