My wife and I had a great time in Iceland, staying at the Hotel Reykjavik Grand. The hotel is a little bit out from the central downtown area, but that was perfect for us, since we had a rental car and the hotel offered free parking on their surface lot. There is a parking garage downstairs, but we weren't sure if it was free for hotel guests, but we had no issues finding spots on the ground level, even when we came back late at night. The rooms were a little dated, but clean, the staff was friendly, the breakfast spread was very comprehensive and good way to start the day. This is a great option for those looking to be close to, but not in too deep in the busy tourist area of downtown Reykjavík.
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