According to this site: http://books.google.com/books?id=DFNZmUrEVY8C&pg=PA108&lpg=PA108&dq=haukey&source=bl&ots=-7OF1EjTXa&sig=2ctm0RjEDvC99USTDhPdsupV7-g&hl=sv&sa=X&oi=book_result&resnum=10&ct=result
"haukey" = "hawk isle" (Norway)
За последен път се одобри от lilian canale - 26 Ноември 2008 10:24
I don't think any icelandic could have done it better, mainly because they don't understand the source. You did a research and you found the answer. It is just that "æ" which means something else, but since the source is old and unclear, I agree with your translation.