Here’s my translation

Alan

"Vera má að svo sé," segir Guðrún, "en heldur mundi eg ætla að þar mundir þú
„(It) may be that (it) is so,“ says Guðrún, „but rather would I expect that there you would

drepa skeggi í Breiðafjörð niður."
dip down (immerse) (your) beard in Breiðafjörðr (ie, according to Zoega, be drowned in Breiðafjörðr, see drepa, Z.ii.3)”

Það sama sumar setur Þorkell fram skip sitt og býr til Noregs.
That same summer Þorkell launches (setja fram, Z11) his ship and prepares (búa not byrja) (to go) to Norway.

Gellir son hans var þá tólf vetra gamall. Hann fór utan með föður sínum.
Gellir his son was then twelve winters (years) old. He travelled abroad with his father.

Þorkell lýsir því að hann ætlar að sækja sér kirkjuvið og siglir þegar á haf er hann var
Þorkell makes-known that, that he intends to seek for himself church-timber and sails out-to sea as-soon-as (þegar…en) he was

búinn. Hann hafði hægja útivist og eigi allskamma. Taka þeir Noreg norðarla.
ready. He had an easy (hoegr) stay-out (at sea) and (but) not very-short. They reach Norway far-to-the-north.

Þá sat Ólafur konungur í Þrándheimi. Þorkell sótti þegar á fund Ólafs konungs
Then (ie at that time), King Ólafr sat (in residence) in Trondheim. Þorkell sought at-once a meeting with king Ólafr

og með honum Gellir son hans. Þeir fengu þar góðar viðtökur.
and Gellir his son with him. They received there good reception.

Svo var Þorkell mikils metinn af konungi þann vetur að það er alsagt að konungur gaf
Þorkell was so greatly valued (cf meta e-t mikils, under meta, Z1) by the king that winter that that was spoken-of-by-all that (the) king gave

honum eigi minna fé en tíu tigi marka brennds silfurs. Konungur gaf Gelli að
him not less money than ten tens (ie 100) marks of pure (lit: burnt) silver. (The) king gave Gellir at

jólum skikkju og var það hin mesta gersemi og ágætur gripur.
Yule a cloak and that was the greatest treasure (görsemi) and an excellent thing-of-value.

Þann vetur lét Ólafur konungur gera kirkju í bænum af viði. Var það stofnað allmikið
That winter king Ólafr caused to build a church in the-town of timber. That was established a very-great

musteri og vandað allt til. Um vorið var viður sá til skips fluttur er
temple (minster?) and everything prepared-carefully towards (it). During the-spring that timber was conveyed (pp. of flytja) to (the) ship which

konungur gaf Þorkatli. Var sá viður bæði mikill og góður því að Þorkell gekk nær.
(the) king gave to Þorkell. That timber was both large (in size) and good (in quality) because Þorkell walked near (presumably this means that he was on hand to closely oversee the operation)

Það var einn morgun snemma að konungur gekk út við fá menn. Hann sá mann
That was one morning early that (the) king walked out with a few men (persons). He saw a person (man)

uppi á kirkju þeirri er í smíð var þar í bænum. Hann undraðist þetta mjög
up on that church which was under construction (lit: in building) there in the-town. He wondered at this greatly

því að morgni var minnur fram komið en smiðar voru vanir upp að standa.
because (it) was (had) come forward less in (the) morning (ie the morning had advanced less) than smiths (construction workers) were accustomed to stand up (rise from bed or simply to start work?)

Konungur kenndi manninn. Var þar Þorkell Eyjólfsson og lagði mál við öll hin
(The) king recognised the person (man). There was Þorkell Eyjólfr’s-son and (he) put a measure against (ie was measuring, see leggja mál, under mál) all the

stærstu tré, bæði bita og staflægjur og uppstöðutré.
greatest beams (tré, Z3), both cross-beams (biti, Z3) and wall-long-beams and posts (uprights).

Konungur sneri þegar þangað til og mælti: "Hvað er nú Þorkell, ætlar þú
(The) king turns (goes) at-once thither to (him) and spoke: “What is (it) now, Þorkell, do you intend

hér eftir að semja kirkjuvið þann er þú flytur til Íslands?"
here-after (ie according to this church´s measurement) to shape that church-timber which you are-conveying to Iceland?”

Þorkell svarar: "Satt er það herra."
Þorkell answers: “That is correct, Lord.”

Þá mælti Ólafur konungur: "Högg þú af tvær alnar hverju stórtré
Then king Ólafr spoke: “Cut (you) off two ell´s from each huge-beam

og mun sú kirkja þó ger mest á Íslandi."
and that church will still (be) built (the) greatest in Iceland.”