Lovi, goes to face it.
It is featherless, huge, clawed, beaked, tailed and crested, hisses and has a rank smell. When it swoops, Bjarki has difficulty pulling his sword from its sheath and attributes this to "Witchcraft!" (p. 177) However, he hauls Lovi out and then easily kills the monster. We are to understand that the sword, when it can be used, always kills. However, any man other than Bjarki would have been flattened by the beast's impact on his shield.
Drinking the troll-being's blood and eating its heart bestows strength and courage on Bjarki's formerly weak and cowardly servant. No further explanation is given here but there is an attack involving witchcraft-controlled trolls later in the novel so there might be some additional elucidation then. We are to understand that elves ride elven horses so perhaps trolls are accompanied by trollish monsters?