Let me preface this by saying I'm not a particularly experienced tourer and I've never been to Iceland. But I'm concerned about your clothing. I might be missing something, but you seem to jump straight from t-shirts to 2 jackets. No jersey? If the t-shirts are cotton, they'll get damp when you're cycling, and won't dry.
Looking at the weather forecast, tomorrow it's going to be 4 degrees celcius on part of the island. It I was going to be in temperatures close to freezing, I'd have some body-layer thermal gear. Hat/neck/gloves? 4 is really cold, especially if there are strong gales and driving rain, both of which are on the forecast. I was riding in weather like that at Easter, and I was wearing multiple layers of merino thermals to stay warm.
An axe sounds like unecessary weight, but I don't know what your plan for that is. You've got 3 digital cameras, and an egg timer that does the same job as the clock on your cell phone. Maybe you can even download an Android app that does the same thing.
If I'm sleeping in a tent, I carry ear plugs. Tents can flap really loudly in strong wind.
Best wishes,
James