Very nice hostel in a great location just west of the main downtown area, near all the restuarants and the harbour. On the other side of the main street is the shopping. Lots of parking available. Room was the biggest we had in Iceland even after staying at two hotels. Same with the bathroom - huge shower. Had a private double room with private bathroom. Excellent excellent value for money in an expensive city. The bed were a little old and they put plastic mattress covers on them which was kind of uncomfortable but you could remove them. Big windows and a nice heater. 5 minutes or less to anywhere you want to go. Nice and quiet.
Also visited Loft, the new HI hostel in more central downtown, which is absolutely gorgeous - go there for a drink on the terrace! They have a nice bar. Definitely stay there if you are younger and dont mind a bit of noise. But both hostels are excellent - if we had known the quality of hostels in Iceland we would hvae stayed at hostels our entire stay and saved a lot of money and not sacrificed on hotel quality.