Not nearly as cold as its name would have you believe, Iceland reveals itself in waterfalls, glacial lagoons, urbane beautiful people, and heaps of candy. Just follow the two-lane Ring Road

He eyed me sternly over his glasses. "This time, no fire and ice."

"I beg your pardon?"

"Something else," he urged me.

I was standing at passport control. I was trying to get into the country. So I was prepared to agree with most anything he proposed. But what was he looking for?

Somehow, things had begun to go amiss when he'd asked, "Why have you come to Iceland?" and I'd replied, "I'm a writer and I'm going to do a story about driving the Ring Road around the whole country."

"Something else?" I repeated his words.

His look softened; it turned all but beseeching. "You writers come here, all you ever talk about is 'land of fire and ice.' Write something else," he insisted.

"I'll try," I told him.

So I suppose I'd better be brief in pointing out that Iceland is home to Europe's largest glacier (it's bigger than Delaware). Or that it is, in terms of recent volcanic activity, one of the hottest places on the globe. It's a land of steaming valleys (the soft, unending exhalations of a thermal spring) surrounded by snow-buried hills. Hence, the beckoning metaphor of Iceland as a warm niche in a cold corner of the planet.

Of course, Iceland has the advantage of a name that encourages low expectations. An "ice land" should be piercingly cold, its scenery unvaryingly white, its people glum and unsophisticated. In truth, winter temperatures in the capital, Reykjavík, are slightly warmer than in New York City. (Spring, though, may not arrive until May.) The terrain has a polychromatic, if often raw, diversity of hues: green pasturelands, milky-blue ponds, golden expanses of moss, the tawny browns and rust reds of rhyolite hills, ebony beaches, tumbling rainbow-ridden waterfalls. And urban life—particularly in greater Reykjavík, whose 170,000 souls make up three-fifths of the nation's population—has a cosmopolitan grace you'd hardly expect in the northernmost capital on earth.

But my wife and I and our two daughters, ages 14 and nine, had not come for urban life. We were here to drive along the 860-mile road that circumscribes the country. Still, having landed in Reykjavík, we were in no hurry to depart. We lived here for a year in the late eighties, and I've returned almost annually; it's one of my favorite cities.

Admittedly, Reykjavík's appeals can be elusive. Everything is too expensive. Shopping is limited. It's a long way from anywhere. Yet the breezes, whether coming east off the North Atlantic or west off the interior mountains, are always fresh; there can't be a cleaner capital in the world. As a backdrop to the city, across Faxa Bay looms rangy Mount Esja, furrowed with snow throughout the year; Reykjavík's little streets are a pleasing marriage of the snug and the monumental. And much of the make-do, patched-together architecture—squat, square, gray houses with lacy curtains and roofs painted bright kindergarten colors—has a gawky, at times zany, charm. Reykjavík is homey, homely, and surprisingly sweet.

The young people are often blond, and often strikingly attractive. They're hip and fit, and always seem to be carrying books. (Icelanders pride themselves on publishing more titles per capita than any other country.) Life feels benign. Reykjavík remains astoundingly safe, at least by American standards. Parents regularly leave babies in strollers out on the street while they duck into a grocery store. During the white nights of summer, when the sun never sets very deep or for very long, you sometimes see children playing outdoors, unattended, at midnight.

My family and I kept things loose, not deciding until the day we left Reykjavík whether to head our rental car north (clockwise) or south (counterclockwise) along the Ring Road. We considered the day's weather report, saw that skies promised to be clearer to the south, and followed the sun in the land of midnight sun.

The Ring Road may be Iceland's chief thoroughfare, but it's no expressway. It's mostly a two-lane road, not always paved. So it's easy to pull over, which we did continually: to approach a waterfall, photograph some horses, inspect an old church, clamber over a lava field. Armed with a roster of must-sees and an armful of brochures provided by an enthusiastic young woman at Tourist Information in Reykjavík, we gave ourselves a week to do the entire circuit. The pace (125 miles per day) sounded leisurely, but we wound up leaving a number of sights for our next Icelandic loop.

What you don't get along the Ring Road are many opportunities to buy groceries. Stores in the countryside tend to have a forlorn, somewhat comical air. You may not be able to find a head of lettuce or a banana, but there's a good chance you can buy shark oil or powdered béarnaise sauce, rent a video starring Demi Moore or Pamela Anderson, or pick up some flavored potato chips for people with very specialized tastes ("smoked ham 'n pickle"?). And there are vats and vats of candy. When they step off their glaciers, Icelanders live on mountains of sugar.

But we had filled a picnic hamper in Reykjavík. The food of choice in the back seat was peanut butter sandwiches made with crusty, dense mountain bread, a staple of the city's bakeries; and for the adults in front, Icelandic smoked trout and pickled salmon on crackers.

Our first stop, about two hours from Reykjavík, was a waterfall, Seljalandsfoss, a thin ribbon of water cascading some 200 feet. If you're willing to get wet (we were), you can walk behind the falls, stepping into a cavelike opening where clouds of spray hang perpetually in the air.

After another hour's drive we reached the headlands and curious rock formations of Dyrhólaey, a striking blend of the ferocious and the sublime. Some of the headlands are more than 300 feet high and drops are sheer; the hiker must be careful. Tucked under one such cliff is a long, glittery, magical beach of black stones—rendered all the more magical by being unreachable when the tide comes crashing against a bend in the cliff, which serves as a kind of portal.

The cliff wall running along the beach operates as an open-air apartment building for a rackety crowd of nesting birds. Here, by the hundreds, are gulls and gannets and those most beloved of Icelandic birds, the stocky, orange-footed, clownish puffins. Like shorebirds themselves, my children scampered barefoot just out of reach of the lightly crashing waves, which now and then broke over their calves with a killing, thrilling frigidity.

A few miles off but not to be missed is the Dyrhólaey lighthouse, where the vistas are extraordinary. Massed to the north are the mountains of the interior and the glowing domed sprawl of Myrdalsjökull, an enormous glacier. To the south a luminous blue sea extends as far as the bulge of the horizon. On either side, spread below you, lies the south coast—burnished cliffs and plains, golds and grays and greens. It's as if, from its secure fastnesses of stone and ice, the entire nation were leaning forward to contemplate the world of the South, those faraway, warmer zones where all but a handful of the world's human population have chosen to reside.

We spent the night a short way beyond Dyrhólaey, in an Edda Hotel in the town of Kirkjubaejarklaustur. (Many of the 17 hotels in the Edda chain moonlight: they're really boarding schools that, during summer vacation, transform themselves into hotels. Rooms tend to be clean and spartan, and to wear an unerasable schoolboy earnestness.) For dinner at the hotel—restaurants on the road are few and far between—we had spicy marinated lamb and halibut steaks in mushroom sauce. A taste of things to come: We happily ate lamb or fish, those two reliably excellent staples of the local diet, almost every night of our journey.

The next morning, after the usual Icelandic hotel breakfast (cold cereal, toast, rolls, limp slices of cheese and luncheon meat, hard-boiled eggs), we drove a few miles off the Ring Road to the canyons of the Fjadrá River. Again we were alone with the land. The walk along the cliff tops, with abrupt glimpses of the river glinting far below, was inspiring. But better still was the hike on the floor of the canyon, while the murmuring river echoed off cliffs that hemmed us in on either side. The Fjadrá, shallow but wayward, made a drunk's cheery progress down the gorge, bouncing first off one wall, then the other, and we had to do a little fording. If the views above were metaphorically breathtaking, the water temperature was literally so: this was glacial melt, so cold it burned the soles of our feet. On riverbank boulders, we ate wonderful Icelandic "thick milk"—a sort of yogurt—as our feet dried in the sun.

We then climbed back into our increasingly mud-colored car and rolled through what must be one of the world's most dismal landscapes: the wasteland underneath Vatnajökull glacier. We were beginning to feel like connoisseurs of desolation. There were long stretches where everything was gray: little stones, big stones, and the huge boulders called erratics. We were passing through a sort of geological dumping ground—the piled moraines of glacial retreats, the forward-swept stony flotsam of flash floods. Fortunately, the sky had turned overcast, so we got the full effect of the bleakness. The only traces of color were the occasional highway signs warning us not to wander off the road: the most recent round of floods had left the rubble pocketed with quicksand.

Our final stop on the south coast was Skaftafell National Park, where we stopped for hot chocolate and a glacier hike. (And where I had a brisk conversation with a teenager working in the information center. Me: "The recent floods must have been terrible." Him: "The worst in years. I was very sorry to miss them.") A glacier's downhill edge is called a snout, a term I always considered inappropriately ugly until I actually came upon one. Then I understood that glaciers are the earth's largest vacuum cleaners, picking up debris as they drift back and forth over the broken valleys they call home. We scrambled onto the snout, which was black as ash: this glacier had been rolling its face in basalt. (In the words of my younger daughter, "It's neat, but it's gross.") Sloping above us as far as the eye could see, the glacier climbed toward the interior, whitening as it went. We were minuscule figures perched on an alp of ice. Yet the ground we stood upon hardly resembled ice. This was frozen water that looked as though it had passed through a conflagration.

A different sort of ice awaited us some 35 miles along, just as the Ring Road turns the corner north. In Reykjavík, the woman at the tourist office had advised us not to miss the boat trips on the glacial lagoon of Jökulsárlón. That was sound advice; we all wound up considering it the highlight of our trip. She was less trustworthy, though, in telling us what we might see. In one of those slips of the English tongue common in other foreign countries but rare in Iceland, she'd promised floating ice burgers.

Icebergs, ice burgers—what's the difference when things are forever taking new shapes?For the most wonderful thing about icebergs, I discovered while we threaded our way in a chugging motorboat through towering constructions of ice, is how readily they metamorphose. They are Rorschach images; they are prompts to the imagination; they're whatever you want them to be. Our kids broke into an ongoing, overlapping run of similes: "That one looks like a bird! That one looks like a hat! There's one like a castle!" Slanting, late afternoon sun found the inner brilliance of every object. The lagoon was an inestimable blue, most of the icebergs unearthly in their pristine blue-tinged whiteness. And if we adults were quieter than the kids, we were no less launched on a stream of comparisons: hey, there's a horse head and a lamppost and a throne.

Just north of the Sea of Dreams lies the Road of Nightmares. The Ring Road turns very spooky along the east coast, spinning into a steep, tortuous, unpaved mountain track without guardrails. (From the back seat: "But what would stop us from falling all the way to the ocean?") It is also surpassingly beautiful: rugged cliff faces hurtling toward winding fjords, distant ghostly dots of sheep wandering among the skeletal remains of abandoned farms. Fishing villages were clustered here and there along the fjords, but there were few traces of life between them. This was July, the height of the tourist season, but often we felt like the last survivors on the planet.

Even the plant life vanishes beyond Egilsstadir (population 1,600), where the Ring Road swings inland and leaves the east coast for good. Gravelly mountains give way to gravelly mountains. This is one of the few stretches of the Ring Road where the sea is remote; the last of the birds disappear.

Eventually we turned off the Ring Road and drove north toward the coast in search of a farmhouse that offers accommodations. We didn't find the farm, but in time we found a hotel—of sorts. The nice thing about being in the middle of nowhere is that thieves no longer seem to exist, since there were no locks on the doors. Unfortunately there were still televisions: amazingly, our next-door neighbor had brought his own. He cranked it up, his door wide open, and left it that way before heading to the lobby to listen to a boom box playing Icelandic cowboy music. Long into the night he and another guest sat, exchanging the-one-that-got-away fishing stories, or perhaps comparing notes on the size of boulders they'd seen fallen on the road. Each would hold up his hands in the air—assessingly, as if gauging length—while the other nodded respectfully and drank more beer.

The next morning we got back on the Ring Road, which, after many uncoilings, began to even out, promising soon to deliver us beside the grassy luxuriance of Lake Myvatn. But here the journey forks, and we had to make a choice: Should we head first to the green, lush borders of the lake, home to (so our guidebook told us) some 15,000 breeding pairs of ducks?Or should we check out the volcanic activity a few miles north, including an old crater called Víti?Well, when we learned that víti is Icelandic for "hell," the choice became obvious. We chose death over life, and were cheered by the result.

The new lava fields near Víti were not only black but glossy; they still wore the sheen of the molten underground. Thermal pools bubbled and popped irrepressibly, eager to swallow up a host of sinners. Others threw up thick, stinking, sulfurous clouds that hid us from one another. And in the midst of this infernal environment, we came upon a mineral pool of an exquisite—a celestial—pale blue. It was a reminder that in the afterworld no hell will be complete without a few tempting, unreachable glimpses of heaven.

Another couple of hours' driving brought us to Akureyri, Iceland's northern capital and second city. In this case, there's a big gap between number one and number two. With a population of 15,000, Akureyri simply lacks the size and wherewithal to play Reykjavík's game: being a small big city. It is at most a big small town.

It's also extremely pretty. Snuggling with a feline neatness under a running spine of hills, it gazes out upon Eyjafjördur. My family and I once whiled away a summer month here—contentedly uneventful days in which we did little more than swim, go for walks, read in the handsome public library, and watch the clouds extravagantly assemble and reassemble themselves over the fjord. Akureyri seems a good place to take up watercolors or yoga. It rarely occurred to us to look for something to do.

Still, looking for something is what the town's teens are constantly up to. Their sport of choice is driving round and round—and round—the town square. Especially on weekend nights they gather in traffic-jamming numbers, doubtless emptying farms for miles around of all nonfarm vehicles. They inch along in their cars and every now and then speed off in a patch of rubber as though seized by some imperative errand. But five minutes later they're circling again, eyeing one another expectantly.

On our only morning there, we were awakened by a sharp rapping that might have been an early-rising, overzealous maid. It was rain, blinding rain, whipping at the window. The weather was another reminder that Iceland's pellucid summer skies have a way of rapidly turning damp, misty, and chilly. With the rain dogging us the whole 270 miles from Akureyri to Reykjavík, we had to abandon plans for a hike. (I'd felt enticed by a trail listed in our guidebook: "The sign, which unfortunately faces the opposite direction, is just before a collapsed bridge.") The rain cleared on the outskirts of the capital, shifting melodramatically into rainbows, but then the clouds rushed back and the rainbows melted into a string of glowing traffic lights. We were back in the big city.

And after our week in the hinterlands, Reykjavík really did seem a big city. Here were tapas bars and Internet coffee shops and clubs. Here were string quartets and martial arts studios and squash courts. And here was, on a mild and sunny July day, a sudden breeze that cut right through my sweater: a breath straight off a glacier. It's something you can forget—in Reykjavík, in summer—but not for long. Iceland's beauty is, ultimately, as rigorous and cutting as a diamond.