I think if Iceland went honestly, thoroughly pagan, only really old people (90+, maybe 70+ years old) would say "Jesus" or the like. Going by Reynir's home flashback, he didn't live with his grandparents, so it could be he's never encountered anyone who'd use Christianic swears. Add to that the fact that the Icelanders seem to have deliberately forgotten huge chunks of Old World, at least at first (see last two pages of Arni section of the prologue), and it's likely that even Icelanders in Reykjavik don't know what a church is.
One think I'd note is that distances don't seem to matter all that much in dreamspace - Reynir certainly wouldn't be sleeping long enough to get to Mora and back with Onni. For all we know, the owner of dreamchurch could be somewhere in Poland or southern Germany.