> Var það gott herbergi.
> That was good lodgings there.
> It was a good lodgings.
> There was good lodgings.

Grace's version best matches the ON.

> Þá mælti Esja: "Hér muntu nú fyrst verða að byggja."

> Esja then said: "Here you will now first come to settle."

> Then Esja said, “Here you will now at once be obliged to
> settle.”

> Then spoke Esja: “First you-will now first need to
> settle-in here.”

I'd make it <byggja> (4) 'to dwell in, occupy', and I'm
inclined to interpret <fyrst> as 'to begin with': 'To begin
with you will have to live here now'.

> Esja sneri þá heim og þegar hún kom heim lét hún gera elda
> í húsunum af vatntorfi því er sviðnaði en yrði sem mestur
> reykur eða remma.

> Esja then turned home and at once she came home and she
> had a fire made in the house from water-turf because
> singed if happened as most smoke or bitterness. (???)

> Esja turns then for home and as soon as she came home she
> had a fire made in the house of that soaked turf which
> singed and became as smoky or acrid as possible.

> Esja turns (goes) then home and as-soon-as she came home
> she caused to make a fire in the farm-buildings from that
> damp-peat (?) which (not því at) singed but (and)
> would-become like (ie would produce) the greatest smoke or
> acridity (acrid-smoke)

As Grace discovered, CV gives 'soaked turf' for <vatntorf>.
<Sem> with a superlative is generally 'as ... as possible',
so I make it 'would become [i.e., produce] as much smoke and
acridity as possible' (or 'the greatest smoke and acridity
possible').

> Og þegar Þorgrímur var þessa vís ...
> And Thorgrim at once was certain of this, ...
> And as soon as Thorgrim was wise to this, ...
> And as-soon-as Þorgrímr was certain of this, ...

It could be 'was certain of this', but I'm inclined to read
it as 'was aware of this'.

> Og er sén var ferð þeirra þá lét Esja bera sorp á eldana
> og horn en hún stóð úti í dyrum er þeir Þorgrímur komu.

> And when they were seen going, then Esja caused to carry
> sweepings to the fires and a horn when she stood out of
> doors when they, Thorgrim (and the 29 others), came. (Z.
> sjá - var þá sén reið þeira, their riding was seen, they
> were seen riding

> And when their journey was seen, then Esja had sweepings
> carried to the fire and horn (so that the smoke would
> smell awful??) and she stood outside in the door when
> they, Thorgrim (and company) came.

> And when their journey was seen, then Esja caused to carry
> sweepings on-to the-fire and horns (neut acc pl, I
> suspect, ie she used more than one) but (and) she stood
> outside in (the) doorway when they, Þorgrímr (et al) came.

I can't decide the number of <horn>; I shouldn't be
surprised if one sufficed, and I doubt that one would want
to waste them. <En> might be adversative 'but', contrasting
what she herself did with what she had done.

Brian