Medieval literature was not well-known back then because it was not seen as important. That's why later it was called the "Middle Ages," as it was in the middle of two ages that they did recognize: the Classical World and the Renaissance. The general view is that that dark hole was the reason why they lost classicism, and why it had to be reborn. In general, they saw medieval lit as part of folk stories and legends, to be told as part of entertainment for the uneducated.
It was only much later, during the Romantic Era, did more become immersed in things like medieval epics. And it was only during Tolkien's time or a bit earlier that medieval studies were seen as important, especially in light of philology and history, e.g., of scholasticism and so forth.