the Natural History of Nitrogen Fixation, provides most of the answers I was looking for - but then it raises further questions.
It has been suggested that abiotic sources of fixed nitrogen on the early Earth, supplied through endogenous/abiotic synthesis and exogenous delivery, were most likely limiting (Raven and Yin 1998; Kasting and Siefert 2001; Navarro-Gonzalez, McKay, and Mvondo 2001). At some point, dwindling concentrations of reduced nitrogen would have become insufficient for an expanding microbial biomass, precipitating the evolution of biological nitrogen fixation (Towe 2002). These prevailing conditions have been used to argue that the innovation of biological nitrogen fixation occurred early in prokaryotic evolution, and indeed the ability to fix nitrogen is found exclusively among members of the bacteria and archaea.
So usable nitrogen probably was limiting to early microbes. But questions remain about how such an expensive and complex metabolic process evolved.
We explore the complex genetic history of the nitrogenase family, which is replete with gene duplication, recruitment, fusion, and horizontal gene transfer and discuss these events in light of the hypothesized presence of nitrogenase in the last common ancestor of modern organisms, as well as the additional possibility that nitrogen fixation might have evolved later, perhaps in methanogenic archaea, and was subsequently transferred into the bacterial domain.