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Sabbatical Question: 5 weeks in Iceland with 6 and 2 y/o

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Hello- I'm lucky enough to have a several week sabbatical between July 20-September 4th of 2015. Iceland, Italy are the top of our list.

We love nature, wilderness, wildlife, horses and are conservation professionals (writer/editor and non-profit leader), our kids are adventurous and have backpacked and slept in tents every year. That said, I've had a hard time thinking through how to spend this life-gift.

I've debated two different approaches:

1) Settle in somewhere in a home exchange or monthly rental, live there for a short time. Drive the ring road but afford it some 15 days or so, visit the natural wonders, and archaeological wonders, but be rooted in a single place for the majority of the time.

2) Make it a prolonged peregrination around the ring road, spending something like a week at a time in four or five different places. Where would those places be?

I'd love any thoughts or advice on how to approach a longer visit to Iceland. I've scanned the thread and it looks like most information relates to how to approach the Reykjavik area or two weeks on the Ring Road. All helpful as well. I think we have time to go a little deeper, but with kids, not necessarily farther in terms of hiking or backpacking mileage.

Thanks.

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