It was an early misunderstanding of tar pit and peat bog excavations as I understand it.
Schools should teach about the bone wars and how they set back set back research by hundreds of years and created dinosaur myths that persist to this day.
I think it's just that there's many orders of magnitude more plankton than anything else, so the dinos might still have ended up as oil, just a negligible fraction (though this is a complete guess by me)
The common ancestor of all dinosaurs was certainly terrestrial, so logically that means birds are the descendants of terrestrial dinosaurs. That was in the Trias. By the Jurassic, small tree-climbing theropods with feathers were gliding and soon starting to fly.