There is a very good book called "The First Fossil Hunters" that deals with discovery and interpretation of fossils in antiquity. Bones of large prehistoric mammals were frequently dug up and displayed as "giants." Some of the more esoteric animals in Herodotus are probably actually references to fossilized dinosaurs.

https://www.amazon.com/First-Fossil-Hunters-Dinosaurs-Mammot...

Also, ancient people would hike up to the top of a hill or mountain and see fossils of sea shells and fish and would accurately conclude that this ground used to be under water. Of course they would have naturally assumed there must have been a helluva flood at one time. Which is perhaps why there are flood myths in so many different cultures.

I strongly believe the flood myths we find from cultures around the globe is due to the end of the last ice-age and the influx of polar icecap meltwater[0] into the oceans during the incredible global climate catastrophe around that time[1]

[0] https://en.wikipedia.org/wiki/Meltwater_pulse_1A [1] https://en.wikipedia.org/wiki/Younger_Dryas