Hafragrauturinn er mjög góður með mjólk.

Because Icelandic usually puts the definite article on the end of the noun instead of using a separate word.

• hafragrautur = oatmeal / oat porridge
• hafragrauturinn = the oatmeal / the oat porridge

Here, -inn is the masculine singular nominative definite ending. So Hafragrauturinn means the oatmeal.

Yes, it is one word, and it is a compound.

It breaks down like this:

• hafra- = oat-, from hafrar (oats)
• grautur = porridge

So hafragrautur literally means oat porridge. Then the definite ending -inn is added:

• hafragrautur = oat porridge / oatmeal
• hafragrauturinn = the oat porridge / the oatmeal

A useful thing to notice is that Icelandic often makes compounds where English would use two separate words.

Er means is. It is the 3rd person singular present tense of vera, which means to be.

So:

• Hafragrauturinn er mjög góður = The oatmeal is very good

A few common forms of vera are:

• ég er = I am
• þú ert = you are
• hann / hún / það er = he / she / it is
• við erum = we are
• þið eruð = you are
• þeir / þær / þau eru = they are

Because Icelandic adjectives agree with the noun they describe in gender, number, and often case.

Here, hafragrauturinn is:

• masculine
• singular
• nominative

So the adjective must also be masculine singular nominative:

• góður = good (masculine singular)

Compare:

• Súpan er góð. = The soup is good.
  (súpa is feminine, so góð)

• Brauðið er gott. = The bread is good.
  (brauð is neuter, so gott)

So góður is used because hafragrauturinn is a masculine noun.

Mjög means very.

So:

• mjög góður = very good

Unlike adjectives, mjög is an adverb, so it does not change form to agree with gender or number. It stays mjög no matter what noun follows.

For example:

• mjög góður = very good (masculine)
• mjög góð = very good (feminine)
• mjög gott = very good (neuter)

Only the adjective changes; mjög stays the same.

Með means with. In this kind of meaning, it takes the dative case.

So með mjólk means with milk.

A slightly tricky point is that mjólk looks the same in several cases, so you do not see a visible ending change here. But after með, it is understood as dative.

You can see this more clearly with pronouns:

• með mér = with me
• með honum = with him

In this sentence, með mjólk means something like with milk / served with milk / when eaten with milk.

Not necessarily.

As written, Hafragrauturinn is definite, so it most literally means the oatmeal.

If you want a more general statement, you can say:

• Hafragrautur er mjög góður með mjólk.

That is more like Oatmeal is very good with milk.

That said, Icelandic sometimes uses definite forms in places where English would sound more general, especially in everyday speech and when talking about familiar foods in context. So the best choice can depend on the situation.

The word order is somewhat flexible, but the sentence as given is a very normal, neutral order:

• Hafragrauturinn = subject
• er = verb
• mjög góður = complement
• með mjólk = prepositional phrase

You can move með mjólk to the front for emphasis:

• Með mjólk er hafragrauturinn mjög góður.

That means roughly:

• With milk, the oatmeal is very good.

A useful rule is that in main clauses, Icelandic usually keeps the finite verb in the second position. So if you move something to the front, the verb still stays second.