Translation:Yesterday there were many people in those streets.
The subject is mnoho, not lidí, lidí is not even in nominative so it cannot be the subject. Mnoho and many other adverbs work like this.
There are also many accepted translations using "on." If your answer used "on" and it was rejected, we would need to see your complete sentence to figure out why.
Oh, I didn't even check. It could also mean the people were just sitting, right?
Yep -- the people could be sitting or standing "on" the street. "On the street" is also used, as you mentioned, in the sense of being homeless; thanks for providing the Czech translation for that!