Okay, I'm a native English speaker and I think both of them fit, so I see nothing wrong with your past progressive (or past continuous as I call it) format there. I think by using the simple past, however, the Professor was just stating a simple fact in the past. Despite this, I think your answer is correct as well. English has a lot of different paradigms that can be used interchangeably, but that's not always the case for your example. For instance,
"I believed he was still keeping a secret from me"
means something different from
"I believed he still kept a secret from me."
The first one means that, in the past, he was continuously keeping a secret from me up to the point that I believed it to be true, whereas the second example means that, at some point in time in the past, I believed he had kept a secret from me in the further past.
But your example is different because the context, if stated generally (which uses the simple past), could mean the same thing as your use of the past continuous, which means that the modern inhabitants had kept themselves apart and were still doing so.
Sorry that I couldn't be more helpful, but I have a degree in English and if I can't figure out why it's wrong, chances are that it's not wrong; it's a variant with a slightly different meaning, but the meaning is so subtle that it depends on more than just the context of what is written in that storyline.