That’s “Sisters” as in nuns. Kirkjubæjarklaustur (“Church Farm Convent”) was the location of a community of nuns before the Reformation and many places in and around the village have reference to the nuns, such as Systrastapi (“Sisters’ Rock”), Systravatn (“Sisters’ Lake) and Sönghellir (“Singing Cave”). The last mentioned place is cave up in the cliffs where the sisters would stand singing in welcome when the monks from a nearby monastery came to visit. (Incidentally, I visited another Singing Cave in June. More on that later).
The waterfall is hard to photograph properly from close up, because of the huge rock in front of it:
Below is the Singing Cave.
It would just about fit a bunch of hobbits of medium height, standing up straight, and I think it must have been bigger (or at least the roof higher) back in the day, because the legend states that the nuns used to stand inside it, and I don’t think they can have been that tiny, even if it was the 1400s. You get there by a precipitous path that begins at the bottom of the waterfall.