Hotel KEA in Akureyi
You can't beat the location. Hotel KEA is in the middle of Akureyi, at the foot of the church and start of the city's main shopping thoroughfare. The rooms are simple yet comfortable, and the staff friendly. The only thing I didn't like as much is that breakfast is served on the first floor and felt a bit cafeteria-like.
The restaurant at Hotel KEA is very good, and can be busy. When we visited, we waited a long time for another large party to finish up. Afterwards, I believe the staff stayed open later to accommodate the delay. You can get a slightly better rate if you pre-pay.