Is it really fair to equate giant squids with the Kraken? The Kraken is supposed to be the size of an island and capable of devouring massive ships. That sounds orders of magnitude bigger than a giant squid to me. Pliny the Elder and Aristotle seem to be describing giant squids. The Nordic legends seem to be describing a mythical animal that may have been inspired by giant squids but certainly is not the same thing.

It seems like it would be similar to say the the Roc has been "found" because we have documented very large eagles. Until we have an eagle that can carry away a fully grown elephant, it's not a Roc.

I thought the Kraken just broke the ships into pieces with it's super-tentacles

I would imagine that between the people who saw the 'kraken' in small viking ships, and the people who wrote the history of these sightings that some embellishments were made.