We flew FI on a weekend getaway trip in October. All in all I was extremely pleased with their service, good entertainment, punctual, friendly, etc. I remember getting one drink free (wine with meal), all other drinks you had to buy.
I've often considered taking those cheap flights (the $99 each way), but I'm someone who is greatly affected by jet lag, and I just don't think I could stand that hour long stopover in KEF, and then still have to face another three or four hours.
Good, but expensive shopping in the airport, many Icelandic delicacies.
Anyway, to answer your question, I was quite impressed with the service. I did join their FF program, not because I reasonably expect to earn a free flight, but because I like getting weird junk mail. Based on their reward charts, you'd need to live on FI to earn flights; much more so than north american airlines.