Tom -- I think the food has made great strides in the past few years...it is still no New York, Tokyo or London, but it is now possible to get a great variety of food in Reykjavík...not just Icelandic food. A lot of the more exotic dishes (all the pickled meats and rotting shark etc) are not really things most people eat on a regular basis. Most of those foods are eaten once a year at a festival called Þorrablót in February. You will safely avoid it. What they do have is some of the best fish and lamb in the world, and a rising culture of locally sourced produce and meat, especially since the crisis. One of the most positive aspects of the crisis has been that it has encouraged Icelanders to consume their local goods again, so instead of importing most meat and produce, a lot of it is being made locally. All the sheep are out in the fields and eating grasses, as are many of the cattle herds. There are even "settlement" breeds of goats and chickens that have been genetically segregated since the original colonization of Iceland (870s), so they are far removed from the modern genetically modified livestock that we see in most of the West. There are some amazing farmhouse dairy products, preserves, chutneys, ice creams, smoked and dried fish, jerkies and so on. It is a lot different than even five years ago.
