At least some of the Munchkins were seasoned professionals. One of them is very obviously Harry Earles. He has a pretty long list of credits. He was Hans in Freaks, and was in The Unholy Three with Lon Chaney. He came from a family that had a heritable type of dwarfism, so he was related to a number of other Little People.
However, that said, I have heard Little People, who have known and been around other Little People before, talk about a special sense of community and belonging when they go to the Little People of America convention, so it’s possible that there was something “Little People of America” convention about the first coming together of all the Munchkin actors. But I’m very skeptical that there were orgies, or anyone needed to turn a fire hose on them.
I think it’s also true that Judy Garland made up a lot of stories, not just about the Munchkin actors, but about a lot of things.