Mér fannst þau fersk í gær líka.

Because finnast uses a dative experiencer.

So mér fannst literally means something like to me, it seemed or I felt/thought. In this pattern, the person having the impression is not in the nominative:

• mér = to me
• þér = to you
• honum = to him
• henni = to her

This is very common in Icelandic, where some verbs do not use the same case pattern as English.

Fannst is the past tense of finnast.

A very useful pair to memorize is:

• mér finnst = I think / I find / it seems to me
• mér fannst = I thought / I found / it seemed to me

So in this sentence, fannst is the main verb and gives the sentence its past-time meaning.

Not exactly.

• finna usually means to find, to feel, or to discover
• finnast often means to seem, to feel, or to think

Compare:

• Ég fann bókina. = I found the book.
• Mér fannst bókin góð. = I thought the book was good. / The book seemed good to me.

So in your sentence, this is the finnast pattern, not the ordinary finna pattern.

Because Icelandic does not need a separate were here.

English often says:

• I thought they were fresh.

But Icelandic uses a structure more like:

• To me, they seemed fresh.

So fannst already carries the idea of seemed / I thought, and fersk is the predicate adjective describing þau. Because of that, you do not need voru in this sentence.

Þau is the neuter plural form of they.

It is used for:

• neuter plural nouns
• mixed-gender groups
• groups where gender is not important or not specified
• sometimes children

So the sentence is talking about a group treated grammatically as neuter plural.

If the group were masculine plural, you would expect þeir.
If it were feminine plural, you would expect þær.

Because the adjective agrees with þau.

Here þau is neuter plural, so the adjective must also be neuter plural:

• þeir voru ferskir = they were fresh (masculine plural)
• þær voru ferskar = they were fresh (feminine plural)
• þau voru fersk = they were fresh (neuter plural)
• það var ferskt = it was fresh (neuter singular)

So fersk is the correct agreeing form for þau.

Yes, here þau is best understood as the subject.

That can be confusing, because some Icelandic pronouns have the same form in more than one case. But in this sentence, þau is the thing being described as fersk, so it functions as the subject of fannst.

A good way to see it is:

• mér = experiencer, in the dative
• þau = the things/persons that seemed fresh
• fersk = adjective describing þau

Í gær is the normal Icelandic expression for yesterday.

Even though í often means in, you should learn í gær as a fixed time expression. Icelandic uses í in several time phrases where English would not.

For example:

• í dag = today
• í gær = yesterday
• í fyrramálið = tomorrow morning

So here you should treat í gær as one unit meaning yesterday.

Líka means also or too.

At the end of the sentence, it usually adds the whole statement to something already mentioned. Depending on context, it could mean:

• I thought they were fresh yesterday too
• I also thought they were fresh yesterday

So the exact emphasis depends on what came before, but líka is marking addition.

Yes, it could appear in other positions, but the emphasis would shift a little.

Your sentence:

• Mér fannst þau fersk í gær líka.

Other possible placements include:

• Mér fannst þau líka fersk í gær.
• Í gær fannst mér þau fersk líka.

Icelandic word order is flexible, but not random. In a main clause, the finite verb usually stays in second position. So if another element comes first, fannst still tends to stay second.

The dictionary form is ferskur.

Adjectives are usually listed in the masculine singular nominative form, so:

• ferskur = fresh

But in actual sentences, the adjective changes form to agree with the noun or pronoun it describes. That is why you see fersk here instead of ferskur.

You would normally change fannst to finnst:

• Mér finnst þau fersk líka. = I think they are fresh too.
• Mér finnst þau fersk í dag líka. = I think they are fresh today too.

This is a very useful pattern to practice:

• Mér finnst ...
• Mér fannst ...

Þ is pronounced like the th in think, not like the th in this.

So þau begins with that voiceless th sound. The au is a diphthong that does not match standard English exactly, but a rough learner approximation is something like th-oy.

So a rough guide is:

• þau ≈ thoy

That is only approximate, but it is a helpful starting point.