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I'm researching an excursion to America (I'm a British Citizen) and planning to fly out using reward points, which means I will be subject to one-way-tax on the way back with BA/AA (Reward points).

As a result, I was looking at alternatives and found IcelandAir to provide a reasonably priced service (ableit with a 16 hour stopover in Keflavik International Airport). I was wondering - during this 16h stopover, will I be able to leave the airport and explore a little, or is this frowned upon? I don't normally get connecting flights.

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I think it is even encouraged by Iceland Air policy of offering 24-hour connections. – Vince Oct 14 '13 at 13:53
There is a reasonably-priced a very frequent airport bus (for a group of 4 a taxi would be comparable). Icelandair also encourages stays of more than one day, generally without increased air fare, and FWIW, I recommend Iceland as a destination in its own right. – Andrew Lazarus Dec 6 '15 at 18:36
up vote 14 down vote accepted

Yes. You can leave the airport. As a British citizen you do not need a visa to visit Iceland. Just be back in time to get through security before your flight leaves. You'll need to be back at the airport at least one hour before departure.

Update: When I originally wrote this answer, an hour was plenty of time for a passenger who already had a boarding pass to clear security and border control. Today, however, with the airport having become much more busy, you may need more than an hour if departing during peak travel hours. Especially during the summer months.

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Thanks for that - I'll fly back via Iceland and have a day there! – George Pearce Oct 16 '13 at 11:00
It should be 1.5 hours prior to the flight departure time. That is to handle situations of passport control/doc checks/security. KEF may not be that strict but its a general rule to keep. – monksy Dec 6 '13 at 19:06

You can leave the airport and go to Reykjavik or Blue Lagoon. It takes 40 min to drive to Reykjavik.

For information about stopover in Iceland you can check this Icelandair page and video

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