It isn't an assertion of a lone God surrounded by false gods, but of a supreme God surrounded by a world of other gods
Well, the word used is
'Elohim', which usually refers to the God of Abraham, but can also refer simply to human beings with authority ('Ye are gods'). So it could be interpreted either way.
The evidence, however, is that early Judaism was not monotheistic
Well, that is indeed supported in the various books of the Old Testament. The general trend was 'going well; period of polytheism; bad stuff; returning to monotheism; going well'. So that evidence is certainly in line with the events recorded.
if that is an issue, this can be moved to Chat.
Nah, it's not an issue for me. I was just making the comment to underline the fact that it is difficult to maintain the idea of multiple gods if one takes into account the whole of the Jewish scriptures.
My own take on the topic is that a significant monolatrist sect within Judaism would inevitably cause a schism at some point. At the very least, a division similar to that between the Pharisees and Saducees would take place. Assuming that Christianity would still arise in some form (as a rule in TLs I assume that the Messiah would still come at some point in time, given my own religious beliefs, though even for those who do not share them it is reasonable to assume that a similar figure to Jesus Christ could arise at some point), it too will struggle with the division, probably influencing the development of the early Church to a greater degree than any other factor. Monolatrist Christians would be far more accepted in Roman society, given Rome's usual attitude to religions other than their own (acceptance in return for respect for the Roman pantheon). Monolatrism may hold that Yahweh is superior to other gods, but it does open the way towards a more conventional polytheism. It's even possible that the monolatrists might cooperate with the Roman authorities to attempt to suppress or persecute monotheistic Christians who would refuse to make offering to the Roman gods.
Islam is a different case, given that unlike Christianity it did not arise directly from the Old Testament and is heavily influence by Arabic culture. It is very reasonable to hypothesise that a religion similar to Islam (i.e. some Judeo-Christian tenets + Arab tradition + other stuff) could take hold, or perhaps that a sect of Christianity could spread to the peninsular. Whether that sect would be monotheistic or monolatrist would be interesting.
I'd also be interested to hear what people think might happen when monolatrist Christian-equivalents/Muslim-equivalents meet the Persian Zoroastrians, and also the Hindus of India. A sect of Christianity that accepted those gods as real might simply be subsumed into any openly polytheistic religion, depending upon how fervent the monlatrists are when it comes to the supremacy of Yahweh. They might simply become a sort of 'Cult of Yahweh' within other religions, that accepts all the gods but pays special attention to Yahweh.
Note: When I use 'Yahweh' I mean the Judeo-Christian God of OTL.