Yes, car hire is really expensive in Iceland, but a lot of other things are too.
You mentioned a Land Rover. Any particular reason for a Land Rover rather than anything else ? Toyota Land Cruisers are more common out there and often are cheaper to hire.
The hirable Land Rovers are often more highly modified for off-road use (which adds to the cost), but will you really need that degree of specialisation ? and have you the experience to utilise it ?
Unless you're travelling with other 4x4s it would be wise to stay on the more commonly used roads and they're all passable with a Land Cruiser. A Land Cruiser is likely to have softer suspension than the Land Rovers, so will give any kit you're carrying, and yourself, an easier time. The first time I visited Iceland I had to get the screw drivers out to tighten loose screws in my panoramic camera far too often
With the economic situation being to volatile it's difficult to know what prices will be like next year. At the moment hiring from an Icelandic company pricing in Krona looks he most economic route, I found SS Car rental
https://www.carrentalss.com/ recently when pricing out a trip for this autumn and their rates are much better than the multi-nationals like Avis/Hertz etc. I've not used them myself so can't recommend them yet but they look good on the web.
I hired from a local company in 2001 and got great service. It saved a lot of time at Keflavik not having to queue at the hire desks when picking the car up.
