Icelandic "ö"

This is a question that has always dogged me. I know that it is actually more appropriate for the phonetics group that exists in Yahoo groups, but I don't know the proper name or e-mail address of that group, so I thought I would mention it here:

Icelandic "ö" pronounced [] derives from Old Norse <o¿> which itself was derived from *a followed by *u. Presumably the Old Norse <o¿> was a low back rounded sound. My question is why (or how) did this sound evolve to [] when original <o> did not? It is paralleled by the change in Icelandic of *[U] to [Y]. One would expect that the next lower sound, [O], would also be fronted to [], but it did not participate in this change. Instead, the sound even lower than that was fronted and raised a bit. This change does not make sense to me. I think one would expect that [O] would be fronted to [] (as has partially occurred, to a slight degree, in French) just as [U] was fronted to [Y] (and then perhaps <o¿> might move up to [O]). Why was [O] exempt from this shift in Icelandic, but the lower sound <o¿> was not? My feeling is that perhaps <o¿> was not any lower than <o>? If so, what was the actual sound of Old Norse <o¿> = Icelanic <ö>?

Andrew