I've been to Iceland three times now and am somewhat familiar. As for driving, yes intend to stay on established roads. I'm pretty brave on remote roads--driving them has sort of been my hobby for the past 40 years.
From what I've seen in Iceland, the roads in the Dakotas are a lot more sketchy. As I've gained experience I now stop and look things over and am not afraid to say, "Nope. Not doing that again!" when I come to something treacherous.
As for guides, my wife and I are pretty adventurous on our own. I do wish I could rent something more like Jeep Wrangler with more clearance there. I looked into bringing my Subaru Forester over--it's proving to be a very capable vehicle. I quickly concluded the costs involved would be prohibitive. There is no ferry service from here, unlike Europe.
I'm still surprised that no here has been to the Faroe Islands. That's making them increasingly attractive to me!
Kent in SD