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Help Please - 2 Nights in Iceland

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My husband and I are flying Icelandair to London in late May and decided to stop in Iceland for two nights en route as there is no charge by the airline for the stop. With that said, I'm now trying to figure out the best way to get "bang for the buck" in this expensive country. Instead of doing tours, I thought we could just get a rental car and explore the Golden Circle on our own and visit a hot spring (up in the air about the Blue Lagoon - seems to be a love/hate relationship with it on the forums). Definitely want to try the famous Icelandic hot dog....

I'd love your ideas, tips, suggestions. As I said, we're not looking to spend a fortune, but I do want to see some of the beauty of the country in the short time we have there. I'm thinking that we'll probably stay in a B&B as that will probably be the least expensive option...however do we need to stay in Reykjavik or are one out of the outlying towns fine?

Thanks in advance!

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