> þá mun sjálft leyfa sig, mun og sjálft lasta sig ef illa er.
> (it) itself will praise itself and (it) itself (will) blame itself

if (it) is badly (done).

I believe that's right. According to proverbs page, `lofa' appears as
a manuscript variant for `leyfa' [
http://www.usask.ca/english/icelanders/proverbs_BNS.html ]. I suppose
it's like the English expression: it will speak for itself. Aha, I
see MM and HP used that very phrase:

MM & HP: "If you are being sincere with me and your motives are good
they will speak for themselves, and condemn themselves if they are evil."

Cook: "If you mean well, your deeds will praise themselves, but if you
mean evil, they will be self-condemning."

Singer: "Es wird sich selbst loben, wenn es gut ist, und es wird sich
selbst tadeln, wenn es schlecht is."

> Hildigunnur hló að kaldahlátur þann

The noun `kaldahlátur' is here a cognate object [
http://en.wikipedia.org/wiki/Cognate_object ], which is a special
instance of what Faarlund calls the lexical accusative (Jan Terje
Faarlund: The Syntax of Old Norse 2004, § 8.4.1, ii, p. 141), used as
an adjunct, as in: `hjó hann banahögg' "dealt him his deathblow", and
`lýstr hana kinnhest' "struck her a blow on the cheek." On various
uses of the accusative, see also Faarlund 2004, § 8.5.1, i, pp.
168-170. Some more examples of the expression `að hlæja kaldahlátur'
here: [
http://www2.lexis.hi.is/cgi-bin/ritmal/leitord.cgi?adg=daemi&n=246259&s=296255&l=kaldahl%E1tur
].

> og var það raufar einar og numið til annars endans.
> and that was all-in-rags (see under rauf, Z) and (the rent/ tear)

extended (reached) (see under nema, Z3) to the other end.

I don't want to be too dogmatic about my interpretation (I could be
mistaken), but if the tear extended (from one end) to "the other end",
wouldn't that make it into two bits of cloth? And wouldn't we first
have to have heard something about "one end", for it to make sense to
mention "the other"? I notice there are a few translations of this
passage online which agree with MM & HP, but I don't know how
independent they are.

> veita til þeirra sætta

The recipient with `veita' is normally dative, so I think "offer such
settlements (as...)" rather than "offer *them* settlements such as..."
(Of course, "them" would still be implied.) Compare the following
examples. In the first two, the thing being offered is expressed in
the genitive after `til' (as, if I've understood it correctly, in our
example), in the last two the thing being offered is accusative
without `til'. But in all of them, the recipient is dative.

(1) þat er hún má veita yðr til hjálpar
"what help she can give you"
"that which she can give you by way of help"

(2) veitti hann þurföndum ok til útlausnar herteknum mönnum
"he gave to the poor and for the freeing of captives of war"

(3) Vil ek bjóðask til at veita þér aðra boen í móti.
"I wish to offer to give you another recompense in return"

(4) þá hefi ek eigi lund til at veita honum atgöngu
"then I have no mind to attack him"