Three boys entered, and Harry recognized the middle one at once: it was the pale boy from Madam Malkin's robe shop. He was looking at Harry with a lot more interest than he'd shown back in Diagon Alley.
"Is it true?" he said. "They're saying all down the train that Harry Potter's in this compartment. So it's you, is it?"
(Harry Potter and the Sorcerer's Stone)
Is ‘all’ a pronoun and indicating ‘they’? If yes, why does it separated from they and be placed in the middle of the sentence?
If you check out these written instances of
...you'll see that sometimes it's a singular subject - such as [he] has been saying all over[the country]. Clearly, the word all modifies the location (the train, in OP's case), not the speakers.
The sentence doesn't specify how many people are saying that HP is in this compartment - we know it's more than one (since "they" is plural), but it could be anywhere between two, and every single person.
Also note that constructions like all down the train, all across the country, all over town don't often mean in every single part. Usually they mean in many different places scattered throughout the named area.
All would be referring to they if the phrase were "they are all saying." "All down" in "they are saying all down the train that […]" means they are saying that to everybody in the train.
