"participle" (grammar) is a verbal adjective qualifying noun, but retaining some properties of a verb
Adjective as a present participle is a "participial" adjective,eg:-Ving--chatting in "round the fire chatting";
Rearranging the sentence, we have:-
"Round the fire chatting" sat the old men--a "participial" adj phrase qualifying "the old men" ;
The verb=sat;pt of main verb sit ; thus avoiding two verbs in a sentence:-
Hence:-The old men sat round the fire chatting.