Hi Marcus
Yes, it is worth coming at that time although the prime time for seeing all the breeding birds is late May and early June. If I can't persuade you to come then, late June will be good too, all the birds are still present, although some of the ducks might starting to get a bit shabby (they do go into eclipse later than Britain though).
For birding purposes there are two main regions which you have to visit in Iceland in summer, the north-east and the north-west.
It all depends on how long you want to stay but THE best area for birding in summer is NE Iceland, around lake Mývatn, Húsavík and the Melrakkaslétta peninsula (rarely visited by foreign birders). You could base yourself here for many days and it has all the Icelandic specialties - reputedly the densest Harlequin population in the world at the river Laxá, 90% of Iceland's Barrow's Goldeneyes and the NE is easily the best place in Europe to see Gyr Falcon (so I'm told by visiting Scandinavian birders). My friend saw 10 different Gyr Falcons on the Melrakkaslétta last weekend. Lots and lots of Red-necked Phalarope, lots of Slavonian Grebes, up to 15 species of breeding duck, several pairs of both divers. And then just millions of the common Icelandic species such as Whimbrel, Snipe (Wilson's Snipe displaying in area last summer), Redshank, Golden Plover etc.
Mývatn also has interesting geology and isn't too far from the gargantuan waterfall Dettifoss. The only possible problem at Mývatn is the phenomenon that gives the lake its name 'mý' meaning midge. The midges are nowhere near as bad as in Scotland in that they aren't biters but the sheer number of flies can be staggering - why do you think all the ducks breed there? However, the number of flies varies and if there is a breeze they disappear and one area which can be bad in the morning might be perfectly fine later on. And vice versa. But if the lake appears to be on fire and billowing clouds of smoke are coming out of the water, then there will be flies that day. You can stay at numerous places around the lake.
Húsavík would be a good base and is the best whalewatching destination in Iceland. Blue Whales have been regular in recent years. The trip to Melrakkaslétta is a long day trip from Húsavík but as it's light 24 hours a day this doesn't matter. Melrakkaslétta (literally Arctic Fox Plain) is a low lying windswept peninsula at the far noth east of the country. It will quite possibly be the bleakest and most godforsaken place that you'll have ever visited. And that's part of its charm. Also great for birds, with lots of breeding Purple Sandpiper, Ptarmigan, Snow Bunting, several pairs of Gyr Falcon, and a long-staying female Steller's Eider. We found a drake King Eider there last June and there is a seabird colony which includes Brunnich's Guillemot. I've never seen Arctic Fox there but they are there.
The other area to visit is the west and north-west. This is where the vast seabird colonies are. Iceland's most westerly point is Látrabjarg, a 400 metre high, 14 km long wall which holds 60% of the world's Razorbills. Very easy to see and photograph Brunnich's Guillemot and Glaucous Gull in this area and it's the second best place in Iceland to see Arctic Fox. But apart from the wildlife it's just an absolutely magnificent location. Walking along the cliff tops in the bright summer night at two in the morning, with the sea 440 metres below, and Arctic Foxes barking in the near distance is as good as it gets in my book.
Distances: Mývatn is six hours' drive from Reykjavík. Látrabjarg c. 7 hours. Látrajarg to Mývatn - allow 8. But you can shorten the trip to Látrabjarg by taking the ferry to Flatey en route and stopping there. Flatey is pure magic, especially in June, when Red-necked Phalaropes walk through the streets of the village, Snow Buntings abound and Grey Phalaropes are also present.
Ah CSI's about to start. Hope that gives you some idea to begin with. I have plenty of more info if you want.
