"The grammar that I'm looking at (E.V. Gordon,
1957) says that in ON "æ" was a long version
of the vowel in Modern English "ash", but you
and Haukur and everyone else seem to be telling
me that it's actually a long version of the
vowel in Modern English "bet". Perhaps this
is one of those cases where there isn't
agreement on which vowel it is, but everyone's
sure that it's one of those two options?"
Well; at some point it may well have been [{:]
but in later Icelandic we always have a [c] before
æ so I'd think [E:] was a better guess (after all
you say /cat/ and not /chat/ in English).