Thanks Guys.
The main point I wanted to check is if anyone had used the airline Wowair? They seem like a budget carrier, so I guess some minor issues are to be expected.
It looks as though flights are available on the dates we want with IcelandAir, so it just depends on whether I'd gain much more with them.
As for the location advice, thanks but I'm strictly limited to my mum's choice of itinerary (she's paying)! From all the tales I've heard from others, I'm sure I'll want to go back another time, this time with full camera gear and an uncluttered diary