I have just returned from a visit to Iceland. Incredible holiday!
We stayed three nights in Reykjavik at the Butterfly Guesthouse (2 nights upon arrival and one night before departing). The guesthouse is very centrally located and close to great restaurants and the main shopping district. It is also very close to "bus stop four" which is the meeting point for airport shuttle, some tours, etc. City attractions are easily reached by walking and the city is very easy to navigate.
The Guesthouse was great value. The owner, Jon, responded to my email inquiries before we booked immediately. That was very reassuring when booking an accommodation unseen. The Guesthouse was well outfitted with nice rooms and a communal kitchen and sitting area. Guests could make their own breakfast and/or bring in food to prepare. it was great to meet other travelers and get their recommendations or pass on ours.
Jon was very gracious and helpful in finding restaurants as well as other advice. He was on site while we were there and let us drop our bags off even though we hadn't checked in yet. He was a great host and most accommodating.
I highly recommend this accommodation if you are stopping in Reykjavik, even for one night.More