It was the promise of the best-tasting Coca-Cola in the world that tempted us to go to Iceland. That and a journey to the centre of the earth - well, at least the volcanic glacier that was the entry point for Brendan Fraser and his crew in the 3D version of the film that opened yesterday.

But, fabulous fizzy drinks and the most spectacular scenery in the northern hemisphere apart, would it be a good place for a family holiday? On the plus side, Iceland is less than three hours' flying time from Britain. Most people speak English, and since Icelanders eat more sweets than anyone else in the world, you're never far from a sugar hit.

The downside, in summer, at least, is that there is 24-hour daylight, so no reason for my eight and five-year-old even to think of bed. Iceland is also hideously expensive - sales tax is 24.5 per cent and almost everything is imported. Careful research and some airline eye masks were the answer.

We started off, like Jules Verne's explorers, in Reykjavik, staying in Holl Cottage, a Hansel and Gretel cute house dating back to 1895, a few blocks from the city's main square. Self-catering is a good option, and a trip around a local supermarket to stock up is always diverting for kids. But I was glad to have taken the precaution of packing a few snacks - a large bag of dried haddock, Iceland's answer to Pringles, costs £10.

Iceland: stranger than fiction

Soured whey with a splash of cod-liver oil? There are no surprises following a visit to the inlaws in Iceland

• The other Icelandic city break

• Fjord fiesta at Iceland's outer limits

• Flying a kite in Iceland

BACKGROUND

• The other Icelandic city break

• Ask our expert: Iceland cool

• Flying a kite in Iceland

• A proper winter city break

Related Links

• Iceland: stranger than fiction

Reykjavik looks and feels like a frontier town, appropriate perhaps for an island pitched geographically between Scandinavian Europe and the US. After picking up the essential Reykjavik Tourist Card (£7.70 for 24 hours and providing access to the main museums and geothermal pools) from the tourist office (Adelstraeti 2), we headed to the National Museum, past Tjornin lake. The museum is a great place to get a feel for the country's Viking roots, although Holly and Rory were more interested in the children's rooms on the first floor, where they could pose in Viking costumes and wield hefty swords.

Another Reykjavik must-do is a whale and puffin-watching trip into the North Atlantic. Iceland is Europe's whale-watching capital, with a season that runs between April and October. We sailed to the islets populated by 30,000 plump little puffins, which gather to breed in summer, and then on to look for whales. We spotted minke whales and dolphins during the three-hour voyage, but on a crowded boat it was difficult for Holly and Rory to get a decent view.

What they loved most about Reykjavik were the outdoor pools. The city has six geothermal baths that offer a chance to relax after a hard day's sightseeing. The public showering and scrubbing with soap before you are allowed to put on your swimsuit (enforced by attendants) takes a bit of getting used to, but then you're free to indulge in one of Iceland's favourite pastimes - sitting in a pool and having a good old gossip.

The glacier called. We drove to the west coast on the ring road, through the three-mile Hvalfjarðargöngin tunnel under the Whale-Fjord, over the bridge to Borganes and then along blissfully empty route 54 along the west coast peninsula. It's a stunning two-hour trip, bleak and beautiful, dominated by moss-covered lava fields, bizarre mountains and waterfalls. No wonder Neil Armstrong and his fellow Apollo astronauts came here on a training mission.

Our base on the Snaefellsnes peninsula was Budir. The Hotel Budir and its tiny black wooden chapel, ringed by a lava stone wall, stand isolated above the beach. We loved its chic decor, the lighting of candles to indicate that it was night time, and its wonderful food - although dinner was so expensive that we took refuge one night in the tiny Fjoruhusid café in nearby Hellnar, and saw killer whales playing while we munched our seafood soup and pasta.

After a morning riding horses from a local stables in Lysuholl over lava fields and along the beach, we headed up to the snowline for the glacier tour of Snaefellsjokull, more than 4,800ft above sea level. Twenty of us donned snowsuits, gloves and hats, climbed into an open truck and set off. The weather was lovely. But in Iceland, things can change in an instant, and we were unlucky. By the time we reached the glacier a vicious wind made even squinting painful.

There should have been views stretching to the West fjords and south to Reykjavík, but we couldn't see a thing. When our guide told us to stay close to the truck because there was a 100ft drop near by, we could only take his word. If Jules Verne's heroes had encountered weather like this, they would have given up and gone home for a hot chocolate. Which is exactly what we did.

NEED TO KNOW

Original Kids (020-7978 7333, www.originalkids.co.uk) offers a five-night trip from £3,850 for a family of four, including return flights with Icelandair, two nights' self-catering in Holl Cottage in Reykjavik, three nights' B&B in two rooms at Hotel Budir, car hire, and whale-watching, glacier tour and horse-riding excursions. Further information: www.visitreykjavik.is

Eat HamborgaraBullan (Geirsgotu 1, www.bullan.is), a burger shack on the edge of Reykavik harbour; organic burgers start at £3.20.

Café Paris (Austurstraeti 14, 00 354 551 1020, www.cafeparis.is), near central Austurvollur Square, has a reasonably priced menu with burgers and pasta

Times recommends

• The three best routes to the Med
• How to cash in on your holiday money
• 10 tips for the perfectly packed suitcase