Hardly qualified as I've not cycled there so take this as very much unqualified opinion... Having driven some of the ring road and had a couple of trips there I would say:
a) It's largely a 2-lane highway without shoulders except nr Reykjavik (4 lanes)
b) Traffic (at least within 100mile of Reykjavik) is moderate but all sorts including buses, trucks, cars - speeds are not especially fast (the lanes are narrow with no shoulders so driver tend to be .. cautious...) but there is no provision for overtaking.
b) Iceland can be very windy - we saw cycle tourists at riding in crosswinds leaning very much
c) It's a big island, huge landscape and the ring road has very long straights.
d) Iceland is STUNNINGLY beautiful and I think by cycling you'd absolutely fall in love... with provisos above
e) Check out roads off the main ring road - these are quieter and access some of the most beautiful areas
f) Major Tunnel north of Reykjavik (Hvalfjordur) - I think you'd have to go around or hitch a ride. The detour is LONG (we drove it) but absolutely stunning.
g) Facilities are sparse
h) Last time we went was in July - glorious long evenings but very cold and windy for camping - maybe we were unlucky.
i) Hot pools are a way of life and a wonderful way to meet the locals, and even small villages have hot pools open till late.
j) Beer is expensive once you leave the duty free at the airport
k) We decided not to cycle there - we are pretty bomb-proof and regular cycle tourists but the ring road did not entice us.
l) I don't do any off-road cycling but seems that Iceland may be suited for that mode for the adventurous: there is a huge network of dirt roads in the interior - of course connecting with the ring road at various points.
m) It's a really friendly country - we found, especially in the mid summer, loads of Icelanders take holidays and are out to enjoy the long days and beautiful environment.
Good luck - you're in for an adventure!
Ian
