So, there was a config file for every user back then?

Miners had to run their own steemd nodes. Most people did not mine, just like most people now don't run witnesses.

It was sort of a two-step process. Step 1 was to complete a proof-of-work and get added to a queue for a turn to validate a block. Step 2 was for the miner at the top of the queue to witness a block as the 21st witness.

If I recall correctly, it was step 2 when the account got created.