What happened to the original Ripple Project?
Why does the current Ripple protocol require a global consensus?
  Can someone use the old Ripple design to make money between people actually work in a local community without a global singleton ledger?
  Wait a sec! WHY DOES RIPPLE EVEN NEED A GLOBAL LEDGER AND CONSENSUS? Each person extends a credit line to their friends, whom they trust. All you need is two sides to sign every transaction, and a routing algorithm. You don't need a global ledger to hold every transaction!
  


Short answer: That wouldn't be Ripple; it would be Open Transactions.

Longer answer: Imagine Alice wants to make a payment to Eve. She opens Ripple, and it finds a path from Alice -> Bob -> Charlie -> David -> Eve. She starts exchanging IOU's until her payment reaches Eve. However, David's node goes down partway through this, leaving Alice with an IOU from Charlie, which is worthless to her.

(There are ways of dealing with this without a consensus sytem by making transactions that are contingent upon knowing a preimage that only Alice knows, but there's not enough space in this answer to elaborate on that. Alternately, you can send the payment through in tiny chunks, so that only a small amount of money is trapped if the payment fails.)

In contrast, if you have a global consensus system, you can make this entire process atomic and uninterruptable.


  Was this abandoned, or is the current Ripple source code able to implement this on a local level?


Don't know; haven't been following Ripple lately.


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It doesn't sound like you need global consensus. That's a good thing, because implementing something like that is almost always a huge pain in the ass.