Iceland is a rather expensive place to visit, goods-wise. The population is small (~367,000) and everything has to come in by boat or plane. Accommodations can be quite reasonable, with a wide variety from hostels, B&B's, hotels.
We tend to do our best to "go native" when we travel - stock up travel food from local grocers, lunch in whatever place we happen to see (some of their gas stations have surprising nice choices!). I was pleasantly surprise when the cashier at the grocery store, a young guy of maybe 17, instantly switched from Icelandic to English when he saw our confused looks. Same thing in a 12 seat restaurant in a tiny village in a fjord. All around, we found the people to be simply "good folks".
The heartbeat of the government might be greed (aren't they all?), but that's not the heartbeat of the people.
Not in the least! It's a phenomenal country for photography, in particular. The scenery changes dramatically about every 40-50 miles, so there's always something different up ahead. It's likely bigger than you think - we spent eight days on the Ring Road (about 800 miles) and I'd call that a "minimum" for a decent trip. One note - if you see a gas station, fill up. The next one is far away!