> og eigi sigla meira en bæði dygði vel skipi þeirra og reiða

> and not further/more sail than both the ship (?)could take (I am
certain this is a Health and Safety thing but I do not get dygði)

'dygði' is the past 3rd person singular subjunctive of 'duga' "to
serve/perform well, to work, be adequate, etc."