Well, it was Iceland circa 1902. It had a ~75,000 person population and was fairly isolated from the world. This run may have been as little as few (couple?) hundred books. I could see such a small run being ignored for a long time. How many of those weren't disposable weekend reads that ended up in the trash within weeks/months? I imagine once the initial novelty wore off, no one cared and Iceland's small number of Icelandic readers guaranteed that their version wasn't going far.
I also imagine some Icelandic people knew they had a different version, but Iceland, up until recently, was just a backwaters of Denmark. It may have been an amusing anecdote between Icelandics and the Danish or English who read the true version. Maybe an inside joke between a couple dozen people? Not enough to make the international press. Now its just a historic novelty on the smithsonian mag blog, not exactly the front page of the NY Times.