October is a great month to visit most places in Europe. Temperatures are milder and it's less crowded. But I never considered Iceland because I figured it would be too cold. When I found out tickets on American were less than $400 RT, I did some digging. Temperatures are typically between the 30's and 40's. Fall colors are peaking and the northern lights start showing up. Most roads and mountain trails don't close until November so you still have access to the Westfjords.
One of the trickiest issues with finding cheap airfare is low cost and short flight time are usually mutually exclusive. This flight, however, is a mere 8 non-stop hours. This is pretty much perfect.
My flights are almost always booked using www.skyscanner.com. Setting up alerts for specific flights and dates is a good way to monitor what's going on in the airline industry. Those specific flights don't have to necessarily be the exact right time for you. But when those alerts come in with dramatic price changes, I jump on the site to see if anything works for me.
People are always asking me to help them find a good fare for a scheduled upcoming trip. But I do it in reverse. When I find good air fare, then I schedule a trip. This doesn't work for everyone but it works perfectly for me.