Maybe I'm being ridiculously critical over my own stuff, but I feel like I need to read some medieval fantasy to get an idea for how characters would talk. RA Salvatore's stuff feels like it really hits the spot (although the dwarves sound way too stereotypical), but I don't have the stomach to read his novels anymore (and I'm not interested in re-reading the ones I already did). I read one novel recently that I REALLY didn't like, the dialogue was just way too contemporary for my liking. I'm not looking for -thee's- and -thou's-, but something that feels....fantasy-ish?
It's not sword-and-sorcery fantasy, but Ellis Peters does a pretty good job evoking the 12th century with the dialogue in her Brother Cadfael mysteries. I love the expressions "to give houseroom" and "hold your soul in patience." No idea if any of it is authentic, but it sounds like it is!
The Warhammer novels, while not strictly medieval, are often quite well written. Then you have Michael Moorcock's Elric series. Of course there is Robert E Howard's Conan or more recently David Weber's Safehold series.
This is kind of hard to answer. The way they talk depends largely on where they came from and where they live and who they are... and I guess that's a given, but it's really up to you. You can use dialogue that simply sounds natural. Or you can use accents. A saylor might say "Ye gums er swollen cos ye don eat lemons, aye." Then again, he might be an intellectual and speak perfectly. Or maybe he had an accent, still, but less pronounced. My favorite dialogue is perhaps this one (if you'll excuse the cursing): "You're...you're shit! You shitting, shitting shit!" [said the king] "Your Majesty," Durzo said gravely. "A man of your stature's cursing vocabulary ought to extend beyond a tedious reiteration of the excreta that fills the void between his ears.” ― Brent Weeks, The Way of Shadows It's not only my favorite, but I think it can illustrate how a character can be eloquent (and not) without any poetic or fairy-tale-ish inclinations. There are other dialogues in the same book that are more poetic while still not seeming fairy-tale-ish. http://www.goodreads.com/author/quotes/1370283.Brent_Weeks One thing you won't find there, I think, is accents directly written. There is one scene in one of the books from that trillogy where there's a conflict between two characters because of one's accent, but the dialogue is still plain english.
Steven Erikson's Malazan books, which are on a level above most other works in this respect. If you want archaic sounding dialogue, you can look at Dennis McKiernan's book Dragondoom.
Mary Stewart's semi-historical trilogy about Merlin is at the top of the list as far as I'm concerned. (The Crystal Cave, The Hollow Hills, The Last Enchantment.) I also enjoy Joe Abercrombie's sense of dialogue, which never seems out of place. Both of these authors never lost sight of the fact, if it is a fact, that 'Medieval' people would have discussed the same sorts of issues we do today, in the same kind of non-highfalutin' language. Obviously the language of the time was different from now, but as long as you avoid obvious anachronisms and modern slang, you can pretty much get away with letting them all talk normally.
Thanks guys, looks like I've got a fair bit of reading ahead. Sometimes it's not even accents and olde English and such, sometimes it's the choice of words that would never be strung together today. I'm not entirely happy with my current dialogue because...well it's not contemporary but I'm not getting the same feel as I did from reading other books.
Medieval fantasy and Sword and Sorcery are not the same thing at all. Sword and sorcery is heavily influenced by romanticism, and usually features settings that fit the description: faraway places, with strange sounding names. Conan is sword and sorcery, the same with Tarzan, and David Eddings work. With sword and sorcery the dialogue has no relation to real historical example, so you can do whatever you feel like.