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Iceland 4 3 days in august. ideas?

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Hi,
I am travelling to Iceland in mid august as a stop over for about 3 days. Other than the Blue Lagoon, which I hear is a must-see, does anyone have any suggestions of where to go or what hotel to stay at in Rajkjavik ( sorry for the spelling mistake). Also, what is the weather like in august? Is it true that it can rain a lot? thanks for returning my posted note if you do. :)

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