Evidently the entire country of Iceland made economic bets that turned out as well as colonizing Greenland, and economy is basically a pile of rubble.
My question is, does this mean it’s a good time to be a tourist there (because everybody is so desperate for dollars/euros that prices are cheap) or a bad time (because every hotel and restaurant in the country has shut down)?
Any other advice for someone who’s thinking about visiting?
Well, I’m not well-traveled around there (in other words, I’ve never been there), but it seems like one of the most beautiful countries in the world. So economy be damned, I’d go there if I had the money and time. Only I’d wait until summer/spring. Surely there are Icelandic people who can give you better info.
After all the U.S. dollar is bad just about everywhere. (Well, maybe not in Uganda, or some African nations, where I’d also like to travel.)
That would be me 
It is one of the most beautiful, strange, places in the world. It’s a place like no other with really wicked nature and sceneries. And I don’t just say that 'cause I happen to live here.
It’s a good time to be a tourist, since prices haven’t really adapted yet to the crappy exchange rates we’re getting. Not on the stuff you’d be interested in anyway… I cursed a whole lot on the way back from the grocery store today though.
You can probably get a really good quote on a good, centrally placed hotel in Reykjavik and most of the touristy stuff is probably (as in, I don’t do them so I don’t really follow the prices on them) well priced aswell.
I’d be happy to answer any and all questions you have. Just throw them out there
ETA: There have been a few threads on Iceland lately, with most of them being in IMHO or MPSIMS, if you want to search.
I thought the dollar was doing relatively well vs. the Euro and most other foreign currency, lately.
Remember, everybody’s economy crashed, and most folks’ seem to have crashed worse than the US.
http://www.iht.com/articles/ap/2009/03/09/business/NA-US-Dollar.php
oh, and **Worm ** is here! Good, he can actually answer the OP! 
The US Dollar is actually stronger against the Euro, Austrailian Dollar, Canadian Dollar, Mexican Peso, etc. than it has been for the last 3 or 4 years…
The global economy has been hit, it is not just here in the USA.
I found the last “I’m going to Iceland, what should I do”-thread, which is full of insights and info. Right here.
ETA: MPB in Salt Lake: and don’t forget the ISK It’s gone from USD:ISK 1:60 to somewhere between 1:110-170 depending on what exchange rate you hit.
A friend has just come back there from a long weekend. She had fun but a long weekend was long enough. Expensive and the food pretty so-so. Worse for vegetarians.
I was thinking about going out there, but it turns out that the top tourist attraction has been moved to some place way out on the wrong side of the island.
How topical. I saw this on Slate.com today.
He moved it a few years ago, which is a pity. Especially considering even I haven’t had a chance to visit, since I don’t have any relatives in that village 
It’s bigger than that. When they built a new aluminum-smelter in eastern Iceland, they actually had a guy come check if the area was “elf-free” before constructions could begin