On my website under Travel > Iceland 2007, you will find my Iceland-specific tips for driving and travelling in Iceland. Note: I was there in April so circumstances are quite different from June. But my comments on the hostels might come in handy.
Definitely bring sleeping bags, even if you stay in hostels or gueshouses you can get discounts if you use your own sleeping bag rather than their bed linen. (for example approx. US$20 per person for a bed in a dorm instead of $25).
People always bash Lonely Planet guidebooks but I found mine to be very useful and there are also leaflets and brochures everywhere (at Tourist Info bureaus or in hostels). At the airport you can get a free Bigmap which is quite a good road map for the entire island if you're only driving the simple roads like the ring road or the roads to major highlights. If you need a more detailed map I suggest you find one in a shop in Reykjavik or at the Tourist Info bureau.
My experiences with Sixt.com car rental were very good. Fair price, good service, nice car (Citroën C4, with heated seats! mmmm). And they gave me the automatic for the price of a stick shift, even though the automatic normally costs more... they also included a TomTom for free but I never used it. Iceland is only small and it's easy to find the way. And I had a lastminute change of plans and they shortened my rental period without any hassle and deducted the costs for that day. You can have the car delivered to an address of your choice in Reykjavik or pick it up at the airport; the same thing goes for bringing it back.
Have fun!
Cécile
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