Please explain the difference in meaning between these 2 sentences, while ignoring the grammar. If I were to say the second sentence in a conversation with a Portuguese speaker, would it be understood or interpreted differently than the first?
The second sentence is rather incoherent. People would probably assume that you meant to use the first one and interpret it as such, because to explain that one thing was ongoing while something else happened, only the imperfect tense (past continuous) is acceptable. The simple past esteve doesn’t work in this sentence.