(a recovered and edited E-Sangha post)
An approximate timeline:
Vedic is the language of the Vedas, the earliest sacred texts of India. The earliest of the Vedas, the Rigveda, was composed in the 2nd millennium BC.
The Vedic is an early descendant of Proto-Indo-Iranian (spoken around 2000 BC), and still comparatively similar (being removed by maybe 1500 years) to the Proto-Indo-European language. Vedic is the oldest attested language of the Indo-Iranian branch of the Indo-European family. It is also still closely related to Avestan, the oldest preserved Iranian language.
Vedic is preserved only in sacred recitation of Vedas. Many dialects have developed, including local dialects, like Magadhi (the language of Magadha region), and dialects of social groups, like Ardha-Magadhi (the language of upper castes in Magadha).
The Ardha-Magadhi is probably used as a ligua franca (language for cultural exchange, commerce and diplomacy) in a wide area of India beyond Magadha.
This language is preserved in Jain texts.http://en.wikipedia.org/wiki/Jainism
Buddha probably uses Ardha-Magadhi for preaching.
"Pāli as a MIA language is different from Sanskrit not so much with regard to the time of its origin than as to its dialectal base, since a number of its morphological and lexical features betray the fact that it is not a direct continuation of Ṛgvedic Sanskrit; rather it descends from a dialect (or a number of dialects) which was (/were), despite many similarities, different from Ṛgvedic. Some examples may help to illustrate this point :..."
Pāli: A Grammar of the Language of the Theravāda Tipiṭaka
By Thomas Oberlies
page 6http://books.google.com/books?id=zFc5_S ... frontcover
Probaly the Indian Brahmanists feel the need to counteract the popularity of Buddha's teaching by propagating their knowledge. Indian grammarian Panini begins a project of resurrecting Vedic language (which he calls 'chandaso') in a form that can be widely used, and composes a grammar.
This new language later acquires a name "Sanskrit" ("refined"), and the vernaculars come to be called "Prakrits" ("natural").http://en.wikipedia.org/wiki/Sanskrit http://en.wikipedia.org/wiki/Prakrit
Still Sanskrit is markedly different from Vedic in grammar and vocabulary.
The development of Sanskrit allows to compose a big epic Mahabharata, and thus to propagate the traditional values among lower castes.http://en.wikipedia.org/wiki/Mahabharata
Ardha-Magadhi is no longer spoken.
The language of Theravada canon comes to be known as 'Pali'.
Buddhist grammarians write down the rules of this language.http://en.wikipedia.org/wiki/Pali
The wave of sanskritization reaches Buddhist scriptures, and Buddhist Hybrid Sanskrit developshttp://en.wikipedia.org/wiki/Buddhist_Hybrid_Sanskrit
The buddhist texts previously precerved in vernaculars are converted to Sanskrit.
Mahasanghika texts are an evidence of this stage, being written in partly sanskritized Prakrit.
However in Theravada the texts are preserved as much as possible in original form and not sanskritized.