A few quick thoughts, as I’m behind schedule planning for what will be our third trip to Iceland next month…
4wd is definitely worth it. We had a Volvo XC that saved us on our last trip. I don’t remember it being astronomically more expensive than a conventional vehicle, but I’d consider it regardless of the expense. Large fuel tank for those stretches w/o fill ups, plenty of room to sleep if you get stranded, etc.
Further we got from cities, our better meals were at bnbs and inns where we were staying. Most also had the usual Scandinavia breakfast buffet, so my wife would often make sandwiches for us to take on the road.
Iceland is my favorite place on the planet. If there’s one flaw, it’s this - it’s seemingly impossible to get a decent bottle of wine. Single malt (great scotch list at the place in Akureyri, down the hill from the Iceland air hotel, other side of the street, before you get to the center/shopping district) & hard cider can be found more or less everywhere, but getting a good Pinot or Syrah to go with all of that lamb rarely happens. If someone had the contacts, you could do a good business just importing cheap reds from Oregon and California.
Skogafoss is a must. First get the best fish and chips at the little stand at the bottom, then climb to the top. But don’t stop. Climb the fence, leave the tourists behind, and follow the rivers the feed the waterfall, far from the things of man.
And you have to have at least one hot dog. And an Applesin.