Sinmara's recent outing is meh. Although the first one was solid, yeah. Carpe Noctem also is a solid band.
Yes, first album of Sinmara was much better than the last one. Carpe Noctem, Naðra, Zhrine and maybe some others are good bands, but not the best from Iceland.
Chao (pre-Sinmara) is also noteworthy. Martröð and Rebirth of Nefast too, but those bands can't be considered as purely Icelandic.