So, when we see that Matthew's first explicit quotation of scripture in his Gospel, the virginal conception of Jesus is said to "fulfill" Isa. 7:14, we know to be cautious before we conclude that Matthew viewed Isa. 7:14 as a direct messianic prediction. Here's the Isaiah passage with its context:
Then the Lord spoke again to Ahaz, saying, "Ask a sign for yourself from the Lord your God; make it deep as Sheol or high as heaven." But Ahaz said, "I will not ask, nor will I test the Lord!" Then he said, "Listen now, O house of David! Is it too slight a thing for you to try the patience of my God as well? Therefore the Lord himself will give you a sign: Behold, a virgin will be with child and bear a son, and she will call his name Immanuel. He will eat curds and honey at the time he knows enough to refuse evil and choose good. For before the boy will know enough to refuse evil and choose good, the land whose two kings you dread will be forsaken." (Isa. 7:10-16; NASB)There are two terrible aspects of the translation of the crucial v. 14--(a) virgin, and (b) will be with child. Both of these obscure the point that Isaiah is making to Ahaz. For the evidence and arguments, see the commentaries. The message that Isaiah wants to present to Ahaz is that the Syro-Ephraimite War (see also 1Kings 16) that has distressed Judah (over which Ahaz is king) will soon be over. How soon? It'll take as long as it takes a baby to be born and grow to the point of eating solid food. It's a message of comfort to Ahaz, and it would be "fulfilled" in the days of Ahaz. It does not look forward seven centuries to Jesus.
The translation of v. 14 should be something along the lines of: "Behold, the young woman is pregnant and she'll bear a son and call his name Immanuel." Why will she call his name Immanuel? Because his birth will signal that God is again caring for his people Judah by ridding them of this threat of war; his birth will signal that "God is with us."
Does Matthew know all of this? I think so. When Luke talks about the virginal conception of Jesus in Luke 1, he does not quote Isa. 7:14. Indeed, this is the only quotation of this verse in the NT. That means that it was not common to apply this verse to Jesus. Nor was it common to see this verse as awaiting fulfillment in the Messiah. Isa. 7:14 is never cited in Second Temple Jewish literature or rabbinic literature as applying to the Messiah. It was always viewed as a simple prophecy for the eighth century BCE. This is exactly like Hos. 11:1 and Jer. 31:15, which we have already seen Matthew knowingly apply to Jesus, in full awareness that their original contexts had nothing to do with a coming Messiah.
Just as in those other instances, so also here Matthew sees a typological fulfillment of the OT passage. What has happened in the life of Jesus is parallel in some significant ways with what happened earlier in the history of Israel. Just as in the eighth century BCE a child was born who signaled God's love for his people, who signaled God's presence with his people, so also now a child has been born that "fulfills" this as well. That is, I think it is this name "Immanuel", maybe even more than the word "virgin", that drew Matthew to this passage as possibly helpful in his presentation of Jesus' early years.
I wouldn't deny, though, that the word "virgin" itself played a part. Levine thought it was mainly this word: "When, 200 years later [200 years after the Greek translation of Isaiah], the author of Matthew’s gospel read Isaiah 7:14 in Greek, he saw a prediction of a virginal conception." I assume that Matthew saw this translation "virgin" in the Greek of Isaiah (parthenos, for the Hebrew word almah) as fortuitous for his own purposes.
But it should be noted that Matthew typically does not rely on a Greek translation in his Gospel. Richard Longenecker (Biblical Exegesis in the Apostolic Period, 2d ed. [Eerdmans, 1999]) surveys the evidence, and it is rather striking. Whereas Jesus in the Gospels typically relies on a Septuagintal form (Longenecker 45), Matthew typically does not in his editorial comments, as here (Longenecker 48, 120-21). In fact, in looking at this exact quotation, Longenecker notes how difficult it is to classify even Isa. 7:14 in Matt. 1:23 as "Septuagintal" (pp. 127-28). Certainly, Matthew's quotation of Hos. 11:1 in Matt. 2:15 departs from the LXX and would make no sense if he had used that text. Longenecker (121) points out other passages in Matthew (4:15-16; 8:17; 27:9) where this also holds true. So, while I wouldn't doubt that Matthew saw a Greek translation of Isa. 7:14 and that that helps to explain why he uses the word parthenos in his quotation of that verse, I do doubt that Matthew came upon Isa. 7:14 for the first time as suggestive of Jesus through the Greek translation. It was, after all, not Matthew's habit to rely on a Greek translation.
Did Matthew misunderstand Isa. 7:14? It looks like that at first-blush, but a closer examination of Matthew's use of scripture at the beginning of his Gospel I think points to a more sophisticated, complex, nuanced use of scripture on his part. At the end of the day, I think Matthew did realize that he was applying a new meaning to Isa. 7:14, that it was not originally a prediction of a far-future Messiah.
I hope that helps as a partial explanation for what Matthew is doing with scripture in his first couple of chapters. While I'll probably return to Matthew's use of scripture at some point, and probably also to Isa. 7:14, I'm going to go ahead and consider this series closed.