Reykjavik isn't half bad. The problem is, as a tourist without any contacts, you just see the usual things. Very clean, nice city full of tourists who are there for the nightlife.
Now, sure the Blue Lagoon is touristy, so what. That is something you must do! It's good fun. Listen, even as a young adult, I had a great time there meeting people, and it's not like they are all foreigners either. The lagoon is way more fun than some of the other spa places.
Again I say, you do not need a 4WD to go touring. No way. I did Keflavik to Hofn and back in a little 2WD thing (fiesta or something) and it was fine except for my stupid idea to park on the beach. If you really want to go offroading then get somebody to give you a real tour. You know what I saw many times in Iceland? People in big 4WDs who were stuck offroad. 4WD does not mean that you won't get stuck, it just means that you will place yourself further from the road and increase the likelihood of getting stuck if you don't know what you are doing. A lot fo people drive their big expensive 4WDs to a particular tour site and then this big monster truck takes you off onto a glacier or onto a lava bed whatever. What's the point? I am not trying to contradict what was said above it's just that I have been there 3 times on a small budget and it can be done. 4WD achieves precious little if you don't already know your way around the geology, it is very tricky so stick to main roads and look out for others.
Do stay. And you can save money in unexpected ways. Stay at the youth hostel in Reykjavik, it's like a hotel and you can chat with real Icelanders and get great tips. You can cook with them. Play chess with them. Discuss sagas. They enjoy contacts with foreigners who are actually interested in learning. Here's a tip, in Scandinavia, real families stay in the hostels, they are every clean and nice and far more social than a hotel. Learn some of the language. Take time to be a person there, not a tourist. Reykjavik at night is fun, you will probably spot a famous young actor or actress, people go there because it is low key and very safe. But it's just not got some fo the same cultural options you will find in larger European cities and so people like me typically drve right through and head for Vik and Hofn and Heimaey.
If you don't stay in a hostel then stay in a farmhouse, that is great fun, the people are very friendly and the food is wonderful. Do not stay in a hotel, it's a tremendous waste of money. You will pay a lot of money for a generic experience, won't meet as many people, and did I mention you will spend a lot of money? Forget hotels.
Here's one very short but very interesting trip you could do: you can get flights to Heimaey, a volcanic island in the Westman islands to the south. That is a great destination if you have a short period of time and want to get as full an experience as you can; just google Heimaey and you will see why. From the flight you can see the new island popping up, and a massive glacier across the water. There are great hikes to do on Heimaey and it's far enough off the beaten track that you will have some nice genuine conversations about what it's like to live in Iceland. You could do the Heimaey trip without any vehicle, you can fly there and just bike or walk around. I am setting up a trip to Iceland in a year or so and Heimaey will be one of our major destinations.
yes, the irony did occur to me!
