Ring Route
Glad to hear you are going to Iceland and that at least you will have a cheap flight because as you have been warned, things get fairly expensive after you land. But it is so worth it. I recommend you do get out into the country, even if just a short loop around the capital - it is haunting and awesome country with incredible variety.
The far western peninsula (starts with an "S" - we called it Snafflefuss because it was so hard to pronouce things) can give you a short course in spectacular scenery, if time and funds are short. There is a hike into a spring that has bubbly water that is really amazing - found it in the road atlas guide book that is available with rental cars - expensive, but maybe you can find a copy somewhere.
Have a wonderful trip and take your time planning it and making some local contacts if you can - that would help you immensely to keep costs down and increase the depth of your appreciation of this remarkable country. Going to an organ concert at the main church which we learned about from a local newspaper was far more memorable than just taking photos of it from the outside.
It is a country to be enjoyed on its terms and let its charms unfold gently with a little study of its history and geology. Dipping into the confounding Icelandic Sagas will make some of the more obscure touring spots come alive with their raucous and bloody stories.
Lonely Planet is a good starting book, but no one guidebook really did full justice to this country. Hope you report back and bring us all up to date on your trip.
Best wishes,
sbagal