1. All historical messages are always downloaded when you sign in. It is possible to implement this feature without storing messages on the server, but Telegram intentionally decided to use servers. You can verify this by logging out of all your sessions and logging in again. All messages would be downloaded from the server.
2. If you ask if the actual messages on the server are in plain-text, it doesn’t matter. The keys for decryption are in memory. Which means anyone with backdoors or server access can get the messages.
This API endpoint will get you all past messages (except for those encrypted by Secret Chats):