A really interesting idea, but, according to Wikipedia, that is not the actual etymology. Here is what it says:
From Old High German liuti, also liudi, from Proto-Germanic liudīz_ (“people”), from Proto-Indo-European _h₁lewdʰ- (“man, people”).
Compare Dutch lieden/luden/luiden "people", Old Norse lýðir (“people”) (whence Icelandic lýður), Old Saxon liudi, Old English lēode (“people”), English lede (“people”), Russian люди (ljudi), Bulgarian люде (ljude).
Check it at
Without any article, the adjective in this lesson's sentence has strong inflection and the adjective has to do the work of the article which means the inflection looks like the definite article inflection. See Starke Flexion here or press the British flag for English explanations. http://www.canoo.net/inflection/wichtig:A
Menschen is used more often to mean "man" with the meaning of "mankind, human beings". It can be used to mean "people" in the sense of all over the world, while "leute" is used for "people" in the more local sense but can take other words to be used more broadly. "Alle leute" means "everyone".