I'm wondering what the cheapest way is to bring alcohol into Iceland. I'm arriving from the US via Canada, so have three nationalities of duty-free shops to choose from!

Don't all these tax-frees have pricelists on the net so you can figure out on the products you want?
This is for Keflavik: http://www.dutyfree.is/english/
Wow, thank you for posting that! The alcohol is so expensive in Keflavik! Will definitely buy at the US's duty-free.

Also, buy at the DF when you land at Keflavik. You're allowed 1litre of spirits, plus (6 beer or bottle of wine) each. Much cheaper than at the stores in the towns.

cliffy - Since OP ask for Keflavik prices I am sure (s)he knows that (s)he can do this - and have you read #2? OP figured out the the DutyFree in Keflavik is much costlier than those in the US, so (s)he prefers to take the stuff all way.

Afraid you will get a BIG and nasty surprise in Iceland, if you try to bring any liquids from the USA in your hand luggage.
B-)
I don't believe so: http://www.tollur.is/default.asp?cat_id=301
"In addition to goods referred to above, travelers can import duty-free alcoholic beverages and tobacco products as follows:
1 liter spirits and 1 liter wine or
1 liter spirits and 6 liters beer or
1,5 liter wines and 6 liters beer or
3 liters wines"
As for brining it in hand luggage, if you buy it inside the airport, within the security gates, liquids are prefectly allowable, right?
On second thought, here's what Aircanada has to say:
"Passengers with connecting flights are advised not to purchase liquids or gels on board the aircraft (or at duty-free), if they:
1) do not have access to checked luggage upon arrival at the connecting airport where duty-free purchases can be added to checked luggage, 2) and/or
have no room in checked baggage to pack duty-free purchases before rechecking their bags.
Duty-free liquids will be confiscated at the security checkpoint and additional charges may apply to check the items in. "
I guess that answers that! I'll be buying duty-free in keflavik!

As long as you stick to the local Duty-rules and religious laws noboby care IN THE ARRIVING country if the liquid is in the hand or checked luggage - or where it is bought.
You can also bring any (reasonable) amount of liquid onto a plane IF BOUGHT IN THE "local" Duty-free "on air side". The problem is that in transit airports all liquids, in handluggage, above 1 liter in 100ml indivudual contaners MAY be taken from you, if the local authorities do not accept a sealed bag from the original countrys duty-free.
For transit in an EU country (not leaving airside!) any Duty-free bought IN AN EU AIRPORT is allowed onto next plane.
are they still doing that extra security check upon arriving in Iceland from non-Schengen/EA countries? Last August when I flew back from the US we had to go through security screening again, which included throwing out partially completed drinks people had bought before departing the US, full bag check and metal detectors.
I hadn't bought any alcohol in the US before departing so I don't know if the special sealed bags were exempt but it would really suck if that's the case.