Learn Icelandic: Er vatnið gott?

In Icelandic, the word for "the" (the definite article) isn't a separate word like in English. Instead, it gets attached to the end of the noun as a suffix. Here, vatn means "water," and adding -ið makes it vatnið ("the water").

Why do we use gott here instead of the dictionary form góður?

Adjectives in Icelandic change their endings to match the gender of the noun they describe. Because vatn is a neuter noun, the adjective "good" has to be in its neuter form, which is gott. If you were talking about a masculine noun like matur (food), you would use the masculine form: Er maturinn góður?.

Is vatnið in the nominative or accusative case here?

It is in the nominative case. Even though this lesson focuses on quirky subjects that use the accusative case (like Mig langar), the verb vera (to be) is a standard linking verb. It links a subject to a description, so both the subject (vatnið) and the adjective (gott) stay in the default nominative case.

How do you form a yes-or-no question like this in Icelandic?

You simply swap the order of the subject and the verb. The statement Vatnið er gott (The water is good) becomes a question by moving the verb Er to the very beginning: Er vatnið gott?. This is exactly how "is" and "are" work in English.