I don’t think it would have been unusable. The first distributed version control systems are more than 20 years old. Plus, the size of hard drives was in the 10s of GBs [0] then and a lot of large projects have repositories that are a few GBs or less. [1]
So I think keeping the entire version history on a local hard drive was doable 20 years ago, but I think you’re ultimately right that keeping history locally would have been a less appealing solution.
[0]: https://www.tomshardware.com/reviews/15-years-of-hard-drive-...
[1]: This is just based on what I happen to have checked out locally, but it includes Rust and CPython.