The Iceland international will not be able to play until January 1 because of Fifa red tape and Blackwell says the transfer rules preventing him from playing until the new year are "farcical", but insists the 29-year-old will be worth the wait.
"We decided to bring him over for a week's training," said Blackwell. "He was head and shoulders above some of the players he was training with and when we look at what we have got, we had to ask is he better than what we have in certain positions? Yes he is.
"The kid was desperate to come here. He feels that Leeds is the club for him. He is a lad who has scored quite a few goals from midfield, he does get into the box and I would love to add a bit more goalscoring ability from midfield.
"I think he can do us a good turn here," Blackwell told the club's official website.
Meanwhile, United's attempt to sign Shaun Derry from Crystal Palace have been placed on hold, as they do not have the money to buy him outright.
Leeds wanted midfielder Derry, initially on a month's loan with a view to signing him permanently for £250k, if a Yorkshire based consortium injects cash into the club.
However, Palace have rejected this proposal and talks are under way in the hope of finding a solution.