Translation:You are not so bad, did you know that?
Shouldn't both "it" and "that" be accepted as a translation for "det"? I typed "it" and it told me I was wrong.
Det is not the third person singular pronoun (it) in this sentence, it's an abstract, a hypothetical question.
You would have to say something like "did you know about it" = visste du om det. (Which cannot be used with the first part of the example as it is worded, they sound unnatural together.)
I'm a bit confused by the superlative here. Wouldn't it be "Du er ikke så dårlig"? This sounds to my American ear like "You are not so the worst". Is this just idiomatic usage?
Yes, it's idiomatic. Saying that something, or someone, is "ikke så verst" - not too bad - is a compliment in Norwegian.
Saying that something is "ikke så dårlig", typically stressing "så", reads more like "not -that- bad", as in it's bad but could be worse; it's not quite as bad as someone makes it out to be.
Tusen takk! And I'd like to add that I'm really grateful for how helpful you and the other moderators are.