I would most definitely be in the capital of Reykjavik. I'll be honest, I don't have a major desire to travel to Iceland in the first place. So I would rather stay in a city where there would be still a lot of familiar elements to me, than go for ultimate culture shock in a smaller town or even the country.
However, being someone who loves books and stories, I would love to see the Safnahúsið (Cultural House), as they have a permanent exhibit of the Poetic Edda and other Sagas, like the original manuscripts. It would be amazing to go and see them, even if I couldn't read them. I'm also fascinated by a current exhibit they have going on now, called Glerregn (Rain of Glass), which is legitimately a display of sharp glass shards hanging on clear threads, and to fully experience it, one is supposed to walk through the glass pieces and risk injury. It is supposed to serve as a sort of metaphor for how humans themselves could destroy themselves in an instant. So a very heavy-hitting topic but very intriguing.