Yes and no. "Music Sharing," as it was called in the day was pretty popular, and most people just saw it as no different then burning CDs or making mix cassette tapes for your friends. In the same way people would record movies to VHS when they came on TV and share them with friends as well, and nobody really thought about it as "piracy." So when the internet became good enough to share large amounts of songs, everyone just kind of continued doing the same things, just on a larger scale.

So it wasn't necessarily that people thought "Finally! A device all my pirate music!" but more that they already had a library of music acquired from "multiple different sources," such as ripped CDs, friends CDs, and yeah, some they downloaded online. The iPod just gave them a device that let them easily carry around that library, no matter where the songs came from, even if piracy helped make those libraries large in the first place.