So I finally received the full refund - 14 weeks and 2 days after Icelandair cancelled.

Not sure if my contacting Icetra expedited matters, but they were most efficient in their communications. I received an acknowledgment from them very soon after submitting my complaint saying as others have mentioned that they give Icelandair two weeks to respond before issuing a binding decision. One week after the Icetra exchange, I received a most bizarre email from Icelandair saying that the case will be "processed at the earliest convenience" (Not sure whose convenience they were looking to meet but I will simply chalk it up to Icelandic/English translation issues). Two days after that, came the magical email saying the refund was processed, although it took 5 days before it hit my credit card. Icetra followed up at the two week mark to verify if Icelandair did indeed issue the refund, to which I was most happy to respond to.

For the Icelandair lurker: The funniest part of the story is that prior to the flight cancellation, I told Icelandair that I would be quite happy to receive a voucher for future travel that I could determine later but they insisted that the only way forward was for me to select my future travel dates at that moment and pay the fare difference. They had zero flexibility on this which of course they did eventually change once they finally realised their policy was way out of step with reality. No matter as once they dug in on that point, I was no longer going to go for anything other than a refund.