Due to the greater difficulty of questing and the lack of availability of published guides for raiding, Vanilla was much slower paced than Retail is now. The world first kill of the first end boss, Ragnaros, didn’t come until something like 5 months after the game started. It took that long for the best players in the game to get to level 60 and get through one raid, and before people say players are better now, it was many of the same player and guilds in that world first race.
Given the slow pace, time was less valuable, so people were more willing to spend time on interacting with other players. You had to wait for a boat to get to the other continent, so there was nothing better to do than chat. It made more sense to coordinate in dungeons because people hadn’t all played them before, so the coordination saved time. In addition, because you were only playing with others on your server, people you met in the wild were often people you knew, so it made sense to interact - maybe just a wave, maybe a full conversation to catch up on things.
On RP servers, that was all often done in character.
A lot of people viewed getting to level 60 as something that was very far off, something that they might never do. As a result, plenty of people had little urgency for leveling. Lots of people were willing to spend their time in cities - mostly Stormwind, but also Ironforge and Darnassus and also smaller towns - where there were other roleplayers congregating. On the initial RP realms, there was a lot of pickup roleplay in these cities.
People roleplayed in /say and emotes, as I believe was the case when you joined the game at the end of BC, and I believe is still the case on Wyrmrest Accord. At the time, I believe Earthen Ring was the biggest RP server.
Those of us who were interested in a more immersive roleplay experience finally got Blizzard to release RPPVP servers; the two initial RPPVP servers were Emerald Dream and Maelstrom. ED developed a roleplay community that was quite similar to the PVE RP realms.
Maelstrom developed a little differently, as its initial population was composed of about half roleplayers and about half roleplay griefers who thought roleplayers would make easy prey in PVP. It turned out that they were wrong; the roleplayers who came to Maelstrom were just as interested in PVP and in fact were there partly because they were tired of the emote centered roleplay on PVE RP servers. The roleplayers “won” because they were just as good at PVP - which meant, largely, world PVP - and had an additional weapon: the name ban. The roleplay griefers were forced to respect roleplay conventions with regard to naming and use of /say and /yell. The emote centered roleplayers on Maelstrom either adjusted, or went underground to use private channels like /guild or /tell for their roleplay, and eventually moved to Emerald Dream or back to PVE RP servers.
Years later, roleplay griefers invaded Emerald Dream, and the same thing played out there. The emote centered roleplayers emigrated en masse, mostly to Wyrmrest Accord.
Over time, the player base declined and server transfers were introduced, so the population congregated primarily on a small number of servers.
To the extent that roleplay itself has declined, I think it’s mostly because Blizzard has taken the history of Azeroth in unpredictable directions incompatible with how the initially provided world was understood. For example, having Blood Elves be a Horde race caused lots of wannabe high elf players to move to Horde; previously they had played white haired night elves as the closest equivalent. It used to be that maybe 80% of night elves had white hair; now, it’s a minority, because people aren’t trying to pick “close to blonde” any more. It also undermined the Alliance roleplay gestalt, which was based on all the high elves in the game being Alliance aligned. The introduction of Death Knights as an Alliance playable race was another big hit to Alliance RP lore. Sharding RP realms with Normal realms where RP naming conventions don’t apply was a recent hit.
The bottom line, I think, is that what you saw when you joined the game was a lot like what was the case when the game started. Many of the people who joined MMORPGs did so because they wanted to roleplay.