I'm certain that almost everyone dismissed it due to its syntax (there are still people out there that dismiss it because of that).
The "killer app" then was an app server + document store called Zope.
Things were smaller than today, but Python was already gaining popularity for scripting. Circa 2001 or so it also had good Gtk and Qt bindings -- there were even some KDE-inspired satellite commercial companies catering to Python/QT.
The discussions in Python land then were about the mythical Python 3000 -- the next, re-imagined version of Python that would fix issues, etc. That was eventually Python 3.
Perl was still king for scripting/admin stuff but losing momentum, and Ruby was mentioned as a nice alternative to Python, but with much smaller use at the time (and even today I think).
Very small. The language was not popular and many people claimed a community project could not overtake languages backed by companies. Same for the Linux kernel.
I would actually love to read some forum/mailing list posts about this. If anyone has any links handy (or knows where to find them) then please post them.