The main roads in Iceland are good and you can get to all the places described on this web by usual car, except for the trips into the Highland. I recommend travelling by bus or special 'mountain cars' there, as there are some rivers you have to cross.
Always remember to drive safely, have the lights on all day (Icelandic law), and every person in the car is required to have the safety-belt on while driving. For better information on driving in Iceland, check this webpage.
Interesting places and things to do in Iceland. Main focus is on families with kids but many good ideas for everyone.
