Which currency to take, and credit cards versus cash ?

Budget - like another costly WEuropean country - use London or Belgium as starting point - remeber that "activities" are costly. (salaries).

Bring CREDIT CARDS - get cash from ATMs - withdraw max. amount each time to reduce fees (you must check with your issuer for the actual fees for you).
Iceland is oneof the countries in the world where CCs are most widely acceprted (more than in NAmerica).
All major currencies (like €, US$, CAD, £) can be exchanged in any bank - and are NOT accepted - or at a terribel rate - in any shop or hotel. But better to get cash on you debit or credit card. A double change of cash is simle grand waste of money.

We spent 2 weeks in Iceland in various places along the ring road and on the Landmannalaugar - Thorsmork trek and never needed any cash. Well, except for one camp site where we needed coins to be able to use the showers. However, the receptionist gave us some coins and we paid for them by credit card :) Moreover, in some places a credit card is vital. We once drove into a parking lot where you paid upon leaving by credit card without being informed that no cash was accepted.

We are Canadian but we gave up trying to us Canadian dollars overseas a long time ago
Just curious: was it ever possible in to get around a (developed) foreign country using only CAD?

We were recently in Iceland and upon arrival took out the equivalent of $100cdn from the ATM for the 17 days. We ended up using the last of the money at the airport before leaving. Everywhere we went took credit cards so we found that was the easiest method of payment.

As far as I know, it has never been possible to travel extensively using Canadian currency. It is easier now that it was 30 years ago, but still not really possible.
In Venezuela about 1980, a thief went through my checked bags while loading them onto a plane, (I was watching from inside the terminal but could do nothing). He took out about $60 Canadian in mixed bills which I had stuffed into a sock for the cab ride once home in Montreal. He looked at the cash, turned it over a few times in the sun and then put it back. He kept a few other things.
I have had other people refuse Canadian currency and call it Monopoly money (Turkey, about 1990) and some one in NYC once threw a Canadian dime at me that I had accidentally paid with.
So, as I said, we only travel with US cash or Euros now.

hjlfreed - are you talking about banks and moneychangers - or are you expecting ANY shop (except near border) to accept foreing currency? IF you really are using foreign currency in a shop - have you tried to check the rate they use - typically they will take you for 20+%

Judging from the reactions on this forum (not particularly OP's), there is a minority of Canadians who seem to think that their currency should be accepted in any underdeveloped country, such as Europe.
Try asking one of those "is $5000 enough for 4 weeks in Europe?"- posters politely to convert their budget into euro and you're likely to get a response along the lines of "what?! CAD is one of the major currencies in the world! You should know the exchange rate!"
Dream on...