Contemporarily, "gnarley", as used in Hawaii, means: (1) rugged, difficult, burley; or (2)nasty, rank, disgusting. Quite different from the stereotypical-SoCal-surfer usage of the word.
(1) -Dude, that test was so frickin' gnarley!
-I know! I definitely got worked.
(2) -Somebody passed out in their own barf at that party last night.