Are you really sure it wasn't possible to use external libs prior to the allowJs flag? I vividly remember a colleague fiddling around with TS when 1.0 was released, and we had discussions about definition files and how lacking they were. But I'm pretty sure he was able to declare an external module as "any" in a d.ts file, and then he could simply require it and use it without type information. As far as I know, the allowJs flag allows you to import/require your own .js files (as opposed to external modules), before that this wasn't possible apparently. Without this functionality I don't know how it was possible to gradually convert a code base to ts. We probably wouldn't be using TS now without the allowJs flag. I guess we are lucky to have picked up TS in a state where most of the early issues have been resolved (not saying there are no issues left).
I totally understand your frustrations with VS, though most of the problems you mentioned seem to be related to the TS integration in VS, and not with TS directly. But issues like yours are the reason why I lost hope in VS. I try to use it as little as possible.
I'm not sure if it was impossible, just that it was a giant mess and it utterly failed to work properly for me. Broadly speaking, point is just that TS treats JS as a second class citizen, and it adversely affects the day to day usability.
I totally understand your frustrations with VS, though most of the problems you mentioned seem to be related to the TS integration in VS, and not with TS directly. But issues like yours are the reason why I lost hope in VS. I try to use it as little as possible.