As previous replies have stated, the Schengen entry and exit process at KEF is pretty fast and painless, especially if one holds an EU/EEA/CH passport. The lines can look formidable during peak hour when Icelandair's connection banks are being processed but they move very fast. The only real "hassle" is if one is selected for the additional TSA screening for US-bound flights. That takes place right after the exit passport control.