From a guy I work with:
Quote:
Iceland is definitely a place you'll want to explore via roads (watch out for "F" roads which are 4x4 roads only). If you really don't want to bother with a car, there are guided services/tour buses that will take care of everything, especially on the Golden Circle near Reykjavik. Otherwise, renting a car is really no different than in other countries. Check that you're insured either through the rental agency or via your credit card provider since your normal insurance won't work there.
Iceland has definitely gotten popular in the summer so if you're picky about your accommodations, book early. Guest houses are the norm, especially outside of Reykjavik, and perfectly acceptable.
We used Nordic Visitor to put together the reservations and car rental for us, even though we designed the trip. With the package it was better than we could do on our own, plus we had an agency to help if anything went wrong and still had the freedom of doing everything on our own.
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He also posted a blog about it here if you're interested (he's a photographer), though his tips are more about traveling there in the winter.