Driving anti-clockwise, filled up 6 times costing 21400 ISK
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Memorable places I visited along the way
Stuff to do that you have to pay for
A bunch of things other people wrote that you may find useful for your trip
I rented the cheapest, crappiest 2WD and survived driving around Iceland in October. You obviously can't go on the F-roads (highlands) but you CAN go on gravel roads. I just drove slower 40-60km/hr and more carefully and was ok. The biggest difference for me was visiting Detifoss and Asbyrgi because I went the looooong coastal way instead of the much shorter road up from Dettifoss (but Detifoss to Asbyrgi via gravel road 862 is still doable with a 2WD).
Driving counter-clockwise from Akureyri, after you pass Laugarbakki on route 1 you’ll have Hrútafjörður on your right. Soon you’ll have to turn off route 1 and go right onto route 68. Afterwards, turn left on road 59. This is a gravel road but was manageable with my crappy car. Then you get to road 60 and turn right onto 54 (also pretty crappy gravel road). The drive along the crappy 54 feels very lonely, in fact, the whole of Sniffles feels much more desolate than even the East. But you'll be rewarded if you turn off right towards Stykkishólmur.
Most of the times the speed limit is 90km/hr. Now I read people complaining of crazy drivers tailgating them. Yes, I experienced quite a few cars going faster (120-130km/hr) but my advice to you would be this: it's their problem if they are so impatient. Don't keep looking in the mirror and freaking out, just focus on the road in front because the worst you can do is get distracted and have an accident. When you get to a straight part of the road, indicate right and move a little so that they can overtake you. I never had problems, the speeders would always overtake me just fine. Around the more populated towns I noticed some speed cameras (including in the tunnels) so be careful here but usually they're clearly marked in advance. I never saw cops measuring speed. At the end of the day, unless you're gonna miss your plane, why would you want to speed? You don't get to enjoy the scenery as much and unless you're a rally-car driver you're risking a lot of money, trouble or even your life, really.
Sadcars have some video/info about driving safely in Iceland: https://sadcars.com/driving-in-iceland/blog. The most dangerous, I think, is getting distracted by the awesome scenery! A few times I was staring at something and had to suddenly slow down and correct my steering... so if you see something great, find a safe place to pull over. This I cannot stress enough!! Once I had to pass some idiots in a 4WD who LITERALLY just stopped in the middle of the road (on a two-lane road) and ran to take pictures of some cute sheep herd. There actually ARE regularly places where you can turn off, either info points or campsites (with signs in advance) or little gravel heaps on the side of the road.
There are a lot of these but don't be scared! Just slow down and see if a car is already on its way towards you. If not, then drive and any cars ahead will wait for you to pass. I wonder if anyone ever drove onto these bridges at the same time... but even then, you would have to be blind to have an accident.
You may encounter sheep on the road (but only in the season when they're released to graze, not in winter). So several times I drove past them herding their sheep literally on the road. Here, just use your common sense - slow down and wait until it's safe to pass. Once I encountered a sheep herd on a gravel road. I drove slowly and honked the horn, which dispersed them and I passed ok.
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