How were duplicate Minecraft usernames created?
Duplicate Minecraft nicknames as far as I'm concerned can be made because:
1- Capitalization usually matters (ex: shaft and Shaft), though it can be placed wherever.
2- Different characters that look the same (ex: Shaft and Shаft), so a Cyrillic е would look the same as a Latin e, but be different Ascii characters.
As for illegal nicknames, it's either because of hacks or being really old.