The development of Proto-Germanic ai in Nordic is very complex. It depends on a number of factors (stressed/unstressed, followed by w, R, h etc.) - see e.g. [Sandøy 2017][1]

>**PGmc. ai > Proto-Norse æi** ([Fulk 2018:][2] 70), which further developed into:

 - æ (before w) (Heusler 1967: 27);
 - ā (before r, h) (this ā further developed into ē in the i-umlaut environment);
 - ei (in OWN) or  ē (OEN) ([Versloot 2017:][3] 285);

In your post, you ask about frǽ (and its variant frjó; [Zoega 1926][4] says that fræ was "sometimes in old MSS. spelt freo or frjó (q.v.), but less rightly").

As you can easily notice, we have *w* after the diphthong in PGmc, which means PGmc ai developed into æ in Nordic (see above), cf. Fulk 2018: 70

"In  addition,  Proto-Norse  æi developed to ON æ (i.e., /æː/) before w (which might be lost, §6.14), as in *aiwīn- > OIcel. ævi ‘age’ (cf. Go. aíws < *aiwaz) and hræ ‘corpse’ (cf. Go. hraíw)."

  [1]: https://www.degruyter.com/view/book/9783110197068/10.1515/9783110197068-084.xml
  [2]: https://www.jbe-platform.com/content/books/9789027263131
  [3]: https://www.degruyter.com/view/journals/flin/51/s38/article-p281.xml
  [4]: https://onp.ku.dk/onp/onp.php?o24213#