It has been a long time since I played Vampire, but - not only is it possible to do a group creation followed by individual preludes - it's the best way to do it.
You will probably need to have a gap in time between the creation session and the first Prelude. There will likely be some tailoring needed once you know the characters. But that's not a huge problem most of the time.
Character Creation for the Mechanics and the Meta
The Character Creation session should be used as a chance to have players become familiar with the system if they aren't already, and to discuss a few details of their characters to ensure they will work together and not have too much overlap.
You also have players discuss meta elements. Perhaps two players want to play rivals. They can discuss these details during this process, decide why they're going to be rivals.
Work up the full character, but I'd suggest telling players that no choices are final. Give them a chance to make changes once they better understand the mechanics and the setting.
During this part of the process, you needn't discuss more than the bare minimum of setting details. You know, just enough to make sure the characters will all fit within the premise. "You're all newly embraced kindred in the crazy world of high finance in the 1980s. Think American Psycho meets Vampire Diaries." Just enough to ensure the characters will work in your premise, and no more.
Prelude for the Setting and Story
Once you have the characters set, you can run individual preludes. This is the stage where you begin to introduce setting and story elements, and it can be run as free of mechanics as you and your players are comfortable with.
It need not be less interesting just because the characters are mortals. But making a story compelling does depend a lot on the GM. If you make the journey memorable, it will be awesome.
The last time I played Vampire, my GM did it this way. I built my Assamite, and then we roleplayed his journey from boy, to man, to trained assassin, right up to the scene where his mentor bites him on the neck and then hangs him up on a meathook. It was horrifying, and gut churning, but it was never dull. Along the way, my GM hinted at what it meant for the future.
You mentioned Initiations in Dogs in the Vineyard. As a GM, I've used this idea in preludes for other World of Darkness games (and other games) to help make them memorable. Players make characters, and then I ask them to ask a question we will answer during the prelude. This helps keep them engaged as they search for their answers.
This way will preserve nice balance between player agency and GM mystery. Players have freedom to create the characters they envision within the limits of the premise, but the GM doesn't reveal too many secrets too soon. I've played it, and run it, and it works well.
Despite the good points made by other answers, I (as a DM) find that this problem happens due to lack of knowledge from new players. They don't bother reading the PHB (understandably) and thus cannot make informed decisions. I avoid trying to help them make their calls and instead use popular class flowcharts I've found throughout the years.
I've linked my favorite one below. My new players have a lot of fun reading this and also understand the point of the class they are playing based on the suggestions of the flow chart.
We essentially guide the players towards a class they like; and we guide their expectation towards how we want that class to behave.
Obviously, results are not perfect, but players realize during the game that they have made the wrong choice (as opposed to us misinforming them), and that the next time they play they want to try another character, hoping they can play it the way the really intend to (as opposed to complaining about their choice).
Best Answer
Start by talking about the characters as people, not as game pieces. Use the background of the game appropriately to give you ways to find out about them beyond game stats.
Here are some examples of what I'm talking about:
The point is to start with a character and then create an in-game avatar to represent that person.