anyone rented a car in Iceland

I haven't driven in Iceland, but I stayed at the Northern Light Inn out near the Blue Lagoon a few years ago, and they offer some good info. Scroll about 1/2 way down the page to the section "Driving in Iceland" The Northern Light Inn is family run and they were absolutely wonderful - I would believe anything they tell me about Iceland! :-)
http://www.northernlightinn.is/moreinfo.htm#ACTIVITES

We rented a car for a day in Reykjavik in early 2010 and it was very expensive. Out-the-door cost for a small economy car, by the time they were done loading on all the extra fees and taxes, was around $160. It was worth the cost, but still.... Roads are generally very good and there's not much traffic. However, some secondary roads turn to dirt, and if I recall correctly the rental agreements prohibiting driving on them. So you might want to know your specific route and road conditions before heading out. A car rental is really the best way to see the countryside, though guided bus tours are also available.

I haven't, but my friend rented a car for 10 days while she drove all around Iceland just her and her 2 young children in the backseat. She had no problems at all. Said the roads were great, barely any traffic once she got outside the city.