Here´s my translation. I agree, Grace, Kjartan’s final convoluted speech was a bit of a brain-teaser, but I think I eventually cracked it.

Alan

Margir menn eggjuðu konung er stund var í milli að nauðga þeim Kjartani til
Many persons (men) urged (the) king when a while (stund) was in between (ie after a certain time had lapsed) to force them, Kjartan (and co) to

trúarinnar og þótti óráðlegt að hafa svo marga heiðna menn nær sér. Konungur
the-faith and (it) was-thought unadvisable (ill-advised) to have so many heathen persons (men) near them. (The) king

svarar reiðulega, kvaðst það hyggja að margir mundu þeir kristnir er
answers angrily, declared-of-himself (that he) believed that, that many would those Christians (be) who

eigi mundu þeir jafnháttagóðir sem Kjartan eða sveit hans "og skal slíkra manna lengi bíða."
would not (be) they (seems superfluous to me?) equally-well-behaved as Kjartan or his body-of-men “and (I / one) shall wait a long-time for such persons (men).’

Konungur lætur margt nytsamlegt vinna þann vetur. Lætur hann kirkju gera og
(The) king caused to perform many a useful (thing, deed) that winter. He caused to construct a church and

auka mjög kaupstaðinn. Sú kirkja var ger að jólum. Þá mælti Kjartan að þeir
to expand greatly the-market-town. That church was made at Jule (Christmas). Then Kjartan spoke that they

mundu ganga svo nær kirkju að þeir mættu sjá atferði siðar þess er kristnir
would go walk so near (the) church that the might see (the) conduct (atferð, Z1) of that faith which Christian

menn höfðu. Tóku margir undir og sögðu það vera mundu mikla skemmtan.
persons (men) had. Many undertook (agreed, taka undir) (to that) and said that would be great  entertainment (a-bit-of-a-giggle).

Gengur Kjartan nú með sína sveit og Bolli. Þar er og Hallfreður í för og margt
Kjartan walks now with his body-of-men and Bolli. There is also Hallfreðr in company and many

manna af Íslendingum. Konungur talaði trú fyrir mönnum, bæði langt erindi og
of (the) persons (men) of (the) Icelanders (Íslendingr). (The) king spoke (preached) (the) faith before persons (men), both a long speech and

snjallt, og gerðu kristnir menn góðan róm að hans máli. En er þeir Kjartan
eloquent, and (the) Christian folk made good applause at his speech. But when they, Kjartan (and co)

voru gengnir í herbergi sín tekst umræða mikil hvernig þeim hefði á litist (see lítast á, Z4)
were (had) walked (back) to their lodgings, a great discussion took-place how (it) had pleased to them with

konunginn nú er kristnir menn kalla næst hinni mestu hátíð "því að konungur
the-king (ie how the king had impressed them) now (ie on this occasion) which Christian folk call the next greatest (ie 2^nd most important) festival  “because (the) king

sagði svo að vér máttum heyra að sá höfðingi hafi í nótt borinn verið er vér
said, so that we might hear (it), that that leader had this-night been born whom we

skulum nú á trúa ef vér gerum eftir því sem konungur býður oss."
shall now believe in if we do (act) after (in accordance with-  or perhaps henceforth(?)) that which (the) king bids us.”

Kjartan segir: "Svo leist mér vel á konung hið fyrsta sinn er eg sá hann að
Kjartan says, “So (it) pleased (see lítast, Z4) me well with (the) king the first time that I saw him that

eg fékk það þegar skilt að hann var hinn mesti ágætismaður og það hefir
I was able(fá + pp)  at-once to discern that, that he was the greatest person-of-excellence and that (impression) has

haldist jafnan síðan er eg hefi hann á mannfundum séð. En miklu best leist
continued (lasted, haldast, Z.iv)  always after-that when I have seen him in meetings. But by-far best (it) pleased (lítast á, Z4)

mér þó í dag á hann og öll ætla eg oss þar við liggja vor málskipti að vér
me nevertheless today with him (Today, however, I was the most impressed I have been with him) and I think for us all (öll) our (vár) business-affairs (málskipti, all neut pl)) lies (is linked, depends. liggja) therewith that we

trúum þann vera sannan guð sem konungur býður og fyrir engan mun má
believe that-one (Him) to be (the) true god whom (the) king proclaims (bjóða, Z5) and by no means (see munr, Z5) may

konungi nú tíðara til vera að eg taki við trúnni en mér er að láta skírast og það
(it) be for (the) king now more-dear (ie he cannot be more eager, tíðr, Z3 or Z4) that I accept the-faith than (it) is for me to let (myself) be-baptised; and that

eina dvelur er eg geng nú eigi þegar á konungs fund er framorðið er dags því að
alone delays (me) so that (er = at,er Z3) I go now not at-once to a meeting with (ie to see) (the) king when (it) is late (neut of framorðinn) of (the) day because

nú mun konungur yfir borðum vera en sá dagur mun dveljast er vér
now the king will be at-table but (and) that day must be delayed (passive of dvelja seems to me to make more sense than Z´s “will be-long-in-coming”, see dveljast, Z4) when we

sveitungar látum allir skírast."
comrades all allow-ourselves to be-baptised.” (ie the day of our baptism must be postponed…presumably until tomorrow)