I think the air was a bit thicker back in the carboniferous. There was the same amount of nitrogen but more oxygen. I think that's what allowed some of the dragonflies to be so massive back then.
Yes, there is actually relatively little CO2 in the atmosphere. A lot of it was pulled down by plant life and ended up as coal. I think a lot more of it was used by tiny sea plankton to build their shells. When the plankton died (coccoliths, I think they're called) they shells fell to the bottom and over time were crushed into sedimentary rock, such as limestone and chalk.
For the first several thousand years of Earth's existence, the atmosphere was not very breathable. It was very smelly because of the H2S gas. There was a lot of CO2 in the atmosphere. Oxygen levels eventually reached about 2% and stayed about that level for a long, long time. Then oxygen levels started rising as plant life took off.