We truly enjoyed our stay at Kirkjufell Hotel. It's important to note that Grundarfjordur is a small town on the northern coast of the peninsula -- not a place where one should or would expect a 5-star hotel. Instead, what you're seeking is a clean, comfortable, friendly place to stay the night while enjoying the beautiful outdoors, which is exactly what Kirkjufell Hotel provides. The hotel is charming in the way that urban hotels lack, with bird and fish identification posters hung in common areas because they are relevant to guests. The lounge areas, though modest, are comfortable, and the included breakfast was a typical Icelandic breakfast buffet with yogurt, cereal, meats, cheese, breads, etc. Our rooms were also typical, perhaps a little larger than the hotel rooms we enjoyed in Reykjavik and elsewhere.
The one note that may be important to others -- I don't think there was an elevator, though it's possible we overlooked it since we were just staying on the second floor.