> This is not actually due to Icelandic being as conservative as you think.
Many would say that is exactly proof of their conservationist nature! While there is some truth to your claim of the language not evolving in a fully dynamic or "natural" fashion (i.e. rather evolving with input from culturally conservative experts and intellectuals, which is how literally all Nordic languages evolve today as far as they're able to control it), Icelandic hadn't really lost that much of the original Norse, and certainly not as much as Norwegian did in the same amount of time.
This is due mainly to a few factors. First of all, Norway became "danified" much quicker because the Black Death wiped out most of our nobility, leading Danish to become much more prominent much quicker over here. As such, Iceland had more of a choice in the matter. Second, Norway is in very close proximity to both Sweden and Denmark, leading to constant influence due to trade and even families migrating back and forth. On the other hand, it takes much more effort to get to Iceland, since you need to undertake a pretty long journey over the ocean to reach it.
Like Norway, who was also under Danish rule, Iceland also went into a phase of revival and romanticism around the Napoleonic wars, leading both peoples to search for their roots. In Norway this struggle lead to the invention of Nynorsk (New Norwegian), which uses a lot of older dialect words—especially from West Norwegian dialects—compared to the almost completely Danish Bokmål (Book Language). These two written languages are still pretty similar, though, and thus pretty much unintelligible with Old Norse.
Additionally, if you listen to Faroese, you'll find that it is also much closer to Old Norse than both Danish and Norwegain, despite the language arguably being much longer under Danish influence than both Norwegian and Icelandic.