Iceland is certainly Europe, despite being non-EU. It's part of shengen. More importantly, for the purposes of this discussion, it's one of 4 european AS partners and one of 6 partners that allows europe-US award travel. So, it's one of the options. And, the fact that they have "real" business seats within europe is relevant for people who can't get a direct flight.
FWIW, every single business class option (other than emirates, which is just a different class of service) is significantly fewer miles than Finnair. My whole point is that finnair is being priced like it's something better than AA / DE / FI and I just don't see it.