1) Duration
I would recommend 10 days if you intend to drive the ring road. Back story: Iceland has one highway that basically circles the entire country (makes it hard to get lost!). All the famous spots are located right off the ring road.
For any less than 7 days, I would recommend staying in the South area (known for Golden Circle, Vik, etc). This is also where the infamous Blue Lagoon is!
2) Best time to go
Summer, Spring is the best time (longer daylight and a tiny bit warmer). However, this is considered peak tourist season so do expect higher prices.
We chose to go during shoulder season (September-Oct 2016). This was a great time for us as October onwards is ideal weather for the Northern Lights to come out. BUT! This is a gamble with weather (shoulder season, doi) since you never really know how the weather will play out. Make sure to dress warmly! Going at this time also produced cheaper prices for car rentals/hotels which benefited us.
3) Our Experiences with Campervans
We had a fantastic time renting a campervan and would highly recommend doing this as it kept us very flexible and allowed us to get to sites early in the morning (or even camp right at the scenic sites!). Plus it saved us money to get groceries (look for the piggy groceries - they're the cheapest).
A couple of things to look for in your campervan: External heater is SO, SO important. Without this, you will be cold and dying (as we did, the first night when we discovered our heater was broken). We rented through GoCamper but Happy Camper is also well-known. Be sure to rent your campervan FIRST before booking your flight. Often times, the best car rental companies are sold out for your dates (unless booked way in advance). We had a wonderful experience with GoCamper and would recommend them to our friends. We had a lot of car problems and they were very quick to respond and was able to get us TWO replacement cars (even having to drive 8 hours to meet us in the middle of nowhere to exchange). Talk about customer service~!
Please drive safely in this country. The weather can be INTENSE (50-70 mph winds, hail, snow, etc). Oh, if you aren't good friends with your travel-mates before campervan-ing with them, you will be after! Hahaha.
A note on Manual VS Automatic: Manual cars are much more common in Europe than in the USA, so you can save a substantial amount renting manual (On a 10 -day rental, it saved us $1,000). However! Don't be an idiot like me and try to think you can learn stick-shift before the trip.. you will regret it (sobs).
Another option would be to rent a regular car and stay at Farmstays (cheaper than a hotel). Check out Blue Car Rental for good prices. If you intend to go off the ring-road and go into the highlands, make sure you get a 4WD. If not, a regular SUV would be fine
4) CamperVan Folks: Stay in Iceland's Campgrounds
For all my Camper Van friends: defintely take advantage of Iceland's wide array of campgrounds. Iceland highly encourages an outdoor lifestyle for their citizens. As a result, their campgrounds are extremely clean and well-kept. Most, if not all, have laundry facilities, kitchenettes, and showers. They also have campgrounds at most of the famous spots (Skogafoss, etc). Look into getting a campcard and look through this website for locations and amenities available.
Do note that if you plan to visit after Mid-September to check the campsite website carefully. Most campsites close after Mid-September or have limited amenities available since it is considered off-season. We were still able to find a good number of sites that were open till the beginning of October.
5) Itinerary
I've attached my itinerary for our trip (email me if you'd like the PDF version). It is mostly grouped by destinations grouped by proximity. I did a ton of research before our trip, so hopefully this helps you! I suggest leaving your days a little bit more loose so you can explore as you will. Some places we stayed longer and others (one place was so windy, we couldn't stay longer than 20 minutes) we left almost right away due to weather conditions. The key to Iceland is to be easy-going and let things come as they well. For example, we randomly saw a sign for the sharp-meat museum (shark meat is a delicacy). It was an entertaining stop and we made some friends with their cats!
We also recommend doing a glacier hike if you can. We went through Glacier Guides for their longer, 5 hour hike which was AMAZING! If you get a chance to go after November, they have tours that go into the ice-caves -- AWESOME!
6) Advice on Travelling through Iceland
Money: Everything is credit-card, no need for cash. The only exception is for gas, they only take credit cards with signature (the USA uses Pin cards), so you just need to buy pre-loaded cards within the gas station. Iceland is QUITE expensive for everything (ie: cheapest thing at KFC is 15$). Make sure that you bring all the clothing you'll need.
WOW AIrlines: We thankfully had a decent experience with WOW airlines (4 hour delay), but they are notorious for lost baggage. We saw some other travelers who had their baggage delayed and since they were on a tight travel schedule, they had to buy new outfits in Reykjavik. I felt terrible for them -- a beanie alone was around 70-80$. Make sure to bring all your important stuff in your carry-on and wear all your jackets! As a budget airline, they had no food, blankets, or any entertainment.
Internet: Rent a WIFI-device (we used TRAWIRE). it's cheap and we were able to get the internet all over Iceland for all of our phones and laptops etc. No need for GPS since you can just use your phone. I also used Google Hangouts (download the Hangouts Dialer App) and was able to make calls through wifi. Very handy when our car broke down in the middle of nowhere...
Culturally: Icelandic people were generally very nice and they almost all speak English. I think the most fascinating thing I learned about their culture was that they believe in Elves! I read somewhere that the government wanted to build a road, but first had to hire someone who could speak to the Elves (in this case, a giant boulder blocking the intended road) and negotiate where the elves would like to be relocated (a location with scenic views and a couple of sheep). The government then paid to relocate the boulder! How wonderful :)
7) Things I wish I knew before the trip!
Not much, we did a lot of research :) but if you have any other questions, do let me know and I will try my best to help you.
If you do end up going in the summer..look into King and Queen of Cliffs (north-west side of Iceland). It is the most remote area of Iceland and it's a long boat ride there. It is a spectacular place where you can get dropped off for a couple of nights and camp. A bit expensive (as it is very remote) but well worth if you have an extra couple of days in Iceland.
I did wish I knew more about the costs in Iceland. I had known it was expensive, but not '70$-for-a-beanie' expensive! We were able to spend about $1500 (including airfare) for our trip but could have easily spent way more if we stayed at hotels and ate out a lot. We did splurge on some things (glacier hikes, one nice meal at a seafood restaurant), but overall tried to keep costs down.
8) The three things you definitely need to bring:
1. Waterproof Jacket - I recently got an Arcteryx Jacket that I've been bringing with me to all my camping trips. It proved very useful in the rainy Iceland weather. Expensive, but I consider it an heirloom piece that will last me a very long time (Lifetime warranty!) I also have a waterproof puffy jacket that made me look like a michelin man but kept me warm.
2. Waterproof Hiking Boots - I have the Vasque Breeze Gore-tex boots. So great and I jumped in puddles all over the place :) They do a great job in keeping your feet warm and dry. I would not recommend these boots for summer hiking though. Definitely invest in a pair of good merino wool socks to avoid blisters & keep yourself warm. I love darn tough socks (great wearability).
3. Waterproof / repellent pants - I pretty much lived in my Prana Meme pants the whole trip. It kept me dry and was very good for hiking, sitting on glaciers, and walking through waterfalls! They were pretty pricey, but was well worth it. We wern't able to do laundry for the entire 10 days we were there, but they still smelled pretty good (disgusting, I know) :P I also recently got the Prana Halle pants which are also very comfortable, they have a lined version to keep you warm in the winters.