Just making sure that I understand before I answer... you're basically proposing having 2 or 3 full days in Iceland, correct?

Any change of leaving on the redeye on Wed night? That would give you 3 full days + 1/2 of Sunday?

There aren't really a lot of really luxury hotels in Iceland. Most are clean and nice, but you certainly won't find the Essex House.

Even though it's been about five years since I've been in Iceland, since you haven't gotten many responses, here are my thoughts...

The schedule you propose is fine - I think Iceland is way underrated as a destination for a long weekend from the East Coast. When I went, we left DC on a Thursday night, arrived in Reykjavik early Friday morning, and returned Sunday afternoon - I went with several friends and we went at the beginning of May. We booked our trip as a package through Icelandair (air+hotel+rental car). It was seriously probably the most fun I've ever had in a weekend, even though I only got probably 8 hours of sleep the entire time. We rented a car at Reykjavik airport, and on Friday after arriving drove out to the Gullfoss waterfall and Geysir (large geyser). We did a little hiking in that area but not too much (it was snowing!). Driving was very manageable. That night we went out to dinner and went out dancing until very late (or early). We got up a little late on Saturday, and spent the day exploring Reykjavik itself, then went out again that night - it was election eve in Iceland and we found ourselves invited to a victory party of one of the political parties that was taking place in the ballroom of our hotel. Sunday morning, we stopped at the Blue Lagoon geothermal spa, and then headed to the airport for our flight home.

We stayed at the Hotel Nordica. It is a little bit outside of "downtown" Reykjavik - not far at all, as Reykjavik is so small for a capitol city, but I would think you'd want a rental car if you stayed there. A quick look online indicates that it is now a Hilton - when I stayed it was owned by Icelandair, so I'm not sure what's changed. It was newly renovated when I stayed and I would say 4 star. The hotel restaurant, Vox, was excellent - I saw recently that Anthony Bourdain has filmed a segment of his show there with the chef. If I recall correctly, there was another hotel right in downtown Reykjavik that was a little fancier and we'd wanted to stay at, but it was full. I'm not sure that there's anything in Reykjavik that would be considered truly 5-star.