A lot of driving, but beautiful. For you kids ages, you've gotten some suggestions already, and I'll add the whale museum (looks interesting and I wish we had gotten a chance to go). Also, there are some walking tours ("free" with donations welcome, i.e.-no taxes I think) that looked good. I had emailed back and forth with one, but we did not do the walking tour. There was a company that does bicycle tours too - I think they had a way to transport kids if my memory is correct. (Again, something we considered). Some people on our cruise last year indicated they were going to go to a local pool (indoor) since this is a part of many Icelanders daily routine. Have fun- it is s beautiful place!