Icelander here, new on the forum; I have NO relation whatsoever to any of the bike rentals, but I just wanted to add my guess as to why renting bikes is expensive here.
Taxes and tariffs on cars and motorcycles are pretty high I think. for example, an €8000 bike costs €13000 after fees - not including dealer markup. (We do get something for the taxes, such as good roads in a largely unpopulated country ...) Then I don't think motorcycle insurance is cheap here - €600/year isn't uncommon for privately owned bikes; rental insurance is surely higher.
Given these economic barriers, motorcycle rental is unfortunately not as mainstream as it could be here. Therefore I believe the motorcycle rental companies have a strong incentive to service the higher end of the market. Overall, it seems that renters get well maintained specimens of solid brands - KTMs and BMWs - an friendly, flexible, and competent service.
This is speculation on my part - but I am quite sure that the prices of rental motorcycles are largely dictated by the market environment — and that renters also do get something for the money.
If you have a bike and you can get it on the Norræna / Smyril Line ferry, then that's clearly worth looking at.
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