No one expects you to speak any Icelandic, precisely because it is a difficult language spoken by only 300,000 people. The younger generation practically all speak English perfectly, and most of the older generation too. I've occasionally come across a checkout assistant without useful English, but probably someone else in the shop will translate if required. Quite a bit of imported stuff in shops is labelled in Danish, and the biggest shopping problem I've had is that not so many Icelanders speak much Danish these days - when you are heading off into the wilderness camping for 10 days and you find 3 different kinds of oats in opaque packaging labelled in Danish, then you want to make sure you are getting 3kg of porage oats not pinhead oatmeal.
Learning just a little bit about Icelandic language, which has rather surprising pronunciation rules, will enhance your experience of going there. It is particularly worth learning some food vocabulary, especially for milk products, if you wish to make sure you are getting a litre of milk not some kind of liquid yogurt, of which there are several kinds available - though it is probably interesting to taste some of the latter. I like knowing the place name elements. In that context It is worth realising that grammatical changes can be a bit dramatic, turning vollur into vellir, fjordur into fjardar and firdir, askja into oskju, (I have not written the accents) etc, as then you can recognise a bit more from the names, which you can then soon parse, most of them being at the level of Smoky Bay (Reykjavik), Snow Mountain Peninsular (Snaefellsnes), etc, and rarely being concealed by the archaisms and multiple language influences of so many continental European place names.
