> Við þetta var lengt nafn hans ok kallaðr Freysgoði,

I'd say:

"By this his name was lengthened and
[he was] called Freyr's priest."

Or less literally:

"Because of this event he got a byname
and was called Freyr's priest."

lengja - lengdi - lengt = to lengthen, extend

Kveðja,
Haukur