> Guðríður kona hans kunni því lítt.
> Gudrid, his wife, was unhappy about it.

Yes, that's right: she took it hard or was grieved/distressed by his
death - literally "little pleased by it" (rather than unaware of it or
not understanding it much). CV cites this passage to exemplify this
sense of 'kunna'. Compare the similar expression 'kunna e-u illa'.

http://lexicon.ff.cuni.cz/png/oi_cleasbyvigfusson/b0358.png