I was in Iceland in '89 or '90. When I asked the only person at the gravel airstrip in Hofn about a rental car (he was around 18, and he dealt with tickets and luggage, fuelled the plane, swept the floor, and handled car rental), he told us he had one he didn't need to return for a week, and we could just take it for a few days. No charge, and he didn't even ask to see my license, just told us where to leave it when we were done. I guess times have changed, but I still think that's typical of Icelandic friendliness.
Anyway, the most perceptive thing I've heard about photography in Iceland is that everything is either very small and close, or very big and far away. Tiny little flowers at your feet, huge glaciers on the horizon (though it's worth getting up close to them too). If you plan your gear accordingly, you won't be disappointed.