This spacious shop is brimming with beautiful knits and knits-to-be. The prices are incredible compared to prices in the US. However, I found the prices at Handknitting Association in Reykjavik to be a little better and those at the department store Hagkaup to be even better.
If you're looking for Plotulopi (unspun Icelandic wool), this is probably the best place to get it. Hagkaup simply doesn't carry it, and although it's a bit cheaper at Handknitting Association, Alafoss has a WAY bigger selection.
I was at Alafoss just before closing time, and although the clerk was friendly, I didn't want to keep her from closing the store, so I didn't end up purchasing anything.
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