As for what I did during the crash — started my own web/usability company in 2000. Nothing to do with the crash (the company I left was successful and bought a few years later — would have made a lot more money if I'd stayed and waited for my stock to vest ;-) Just wanted to get out of management at the time.
Just because the VC / startup market was crashing and burning didn't mean that a whole stack of existing companies didn't want to get on the web at that time ;-)
From my perspective a lot of it depended on where you lived.
The folk I know who were working in the US at the time didn't really notice a lot of difference if they weren't in the valley or NYC. Because outside of those areas the crash didn't cause that large a change in the job market. In the UK (where I live) not a lot changed outside of London, and maybe Brighton.
If you were in SF or London though you were facing a lot of skilled people hitting the streets at roughly the same time. Which obviously drove wages down. For a time it was a employers market.
For me the biggest visible changes I saw were:
* on the bright side: far fewer idiots were hired
* on the dark side: far fewer newbies were hired and trained on the job
* I got fewer calls trying to poach me, and lower offers for London jobs
* I faced a lot of competition from other folk starting their own agencies after leaving a failing startup
The biggest problem was faced by complete newbies or folk still finding their feet — since there were far more experienced folk around in the job market. And they got hired first.
Advice for developers who want to insulate themselves:
* If you're working now save money. Money gives you options.
* Be good at your job.
* Understand how to communicate to third parties that you are good at your job.
* Stop thinking that all work outside of the non-VC funded world is dull an uninteresting. It isn't.
* Have connections outside of the startup echo chamber.
* Live, or be willing to move to, locations that aren't flooded by hundreds of people just like you.