> en fóturinn loddi.
> but the leg hung on (by the odd sinew?).

I'm not a medical man, but I guess it must be something like this.

Zoega: "hung by a shred"
MM & HP: "all but severing it"

> Ríður hann við tólfta (ordinal not cardinal) mann
> He rides with (the) twelth man (as one of twelve men?)

That's right; in a party of twelve, i.e. with eleven others.

> Þá þagnaði Þórarinn (subject) og þótti vandast (verb or superl

adj.?) málið.

> Then Þórarinn became-silent and seemed the matter

to-become-difficult (most-difficult).

MM & HP: "Th. fell silent, as he realized the difficulties in his
claim." Verb, I think; see 'vandast' in Zoega where he quotes Hrut
from Ch. 2: 'þykki mér nú vandast málit', which we met in the
modernised form 'þykir mér nú vandast málið'. And see here, six lines
from the bottom of the right column [
http://lexicon.ff.cuni.cz/png/oi_cleasbyvigfusson/a0105.png ], where
the unambiguous form 'vandask' is used. (Incidentally, I've seen a
short extract of the saga printed printed in manuscript spelling and
it used -z for the reflexive ending, in that passage at least.)
Besides which the expression is still current, e.g. try searching for
the past tense "vandaðist málið" on Google.

> það vel fyrir mælast og gefum honum gjafar og sé (subj of vera) hann

vinur okkar alla ævi síðan.

> that will be well spoken and (if we / so let us?) give him gifts and

he (would) be our friend for all time afterwards.

MM & HP: "it would be spoken of to our credit if we gave him gifts,
and it would make him our friend for life." But they seem to be
paraphrasing a bit here.