[cultus]

Smaller populations very reliably have slower-evolving language. Icelandic is similar to old Norse and old English. Just like you'll hear a lot of Iowan accents in Atlanta but not if you drive 80 miles outside of town.

Believe it or not, there is an entire field called linguistics that studies human language and how it evolves.

[Mediterraneo10]

Although Icelandic maintains an orthography close to Old Norse, the value of the letters is very different today indeed. The vowel system, for example, has been greatly restructured. Preaspiration became a quality of the consonants.

In terms of lexicon, much of the archaic flavour is actually the result of 19th-century language reformers trying to restore old words. In the meantime, Icelandic had borrowed heavily from Danish.

Indeed, there is the field of linguistics, and scholarly treatments of Icelandic (as opposed to pop-sci presentations of the language as a time capsule like yours) point out that Icelandic has undergone a great deal of innovation like any other North Germanic language.