I have no pat answers for any of the above. I can however, tell you what I know from my research and my own observations. I have been collecting fossils in my region for about the last 5 years as an essential phase of understanding the Paleo and Archaic peoples who inhabited this region. [Central New Jersey]
First, you must realize that 90% of the fossils found worldwide, are marine fossils. The town I live in is situated on the Rancocas Creek, at the convergence of Mill Creek. Marine fossils of every type imaginable can be found here.
The early peoples valued the fossils. They were very aware that these "stone animals" had once lived. There were certain animal fossils, mainly cephalopods, that had a spiritual meaning or value.
Considering that marine fossils are found the world over, I can imagine that the early inhabitants also found them and had there own ideas about them.
Remember, there have been 5 major extinction events, and a handful of smaller ones. The Permian extinction wiped out 95 % of all life in the oceans. About 75 million years later, the Ordovician Extinction took out 85-90% of marine life.