> ef hann hefði þrek til haft
> If he had had the courage/fortitude

That's right.

> Stefna skal málinu svo að eg heyri á
> The summons must be spoken that I hear it

Yes, the summons must be made so that I hear it / within my hearing.

> Þú skalt þá stefna og skal rangt svo að eigi sé meir en annað hvert

orð rétt.

> you shall the summons (repeat) and shall do it so badly so that

only/ no more than - every second word is correct

Yes.

> Hann mun segja þér að eigi megi það ónýta.
> He will say to you that nothing was wrong with it

That's the idea: "that won't be ruined/quashed" (i.e. by anyone
finding a loophole in it).