> Heil allt!

Not quite there yet :-) The form 'heil' is either feminine
singular nominative/accusative or neuter plural nominative/accusative
whereas 'allt' is neuter singular nominative/accusative.

> How would an Icelander then distinguish between 'finna' and 'vinna', for
> example? Is it dependent on context?

I seem to have been misunderstood. :-) I have no trouble distinguishing
between Icelandic 'f' and Icelandic 'v'. My troubles are in reliably
producing the difference between 'f', 'v' and 'w' in English.

To understand what I mean we can put the consonants on some sort of linear
scale (a gross oversimplificiation - but hopefully illustrative).

Icelandic: f v
English: fv w
1234

Let's say the Icelandic 'f' occupies position 1, our 'v' has position 3
and the English consonants are positioned as above. Then what happens
when someone utters an English 'v'? In my brain it'll have a tendency
to fall into one of the two slots occupied in my Icelandic system and
thus to be recognized as either 'f' or 'v'.

Very fine ferry vine.

Haukur