It would preemptively multitask DOS applications.
No, it wasn`t. There was some primitive form of virtual process thing, but multitasking is a different kind of beast.
Anyway, there is nothing really magical about preemptive multitasking [..] if you had a A1000 with just 256K of ram, you probably were not doing much multitasking anyway...
Open Notepad, open Amiga Basic, run the Bach-Tune-Demo and write a note while it is still playing. Try this under DOS.