Hey up Rob,
I too am a Cestrian, a Stopfordian to be more precise, but was born in Manchester city centre, which makes me a Lancastrian as well to some extent.
Birding is possible at any time of the year, including January and February, but there are obvious disadvantages with coming at that time, mainly the short daylight hours in January. Once you get into February then it's similar in terms of daylight to Britain and the daylight starts racing away once you're in March, and by mid-April it's like mid-summer in Manchester in terms of daylight.
Early January and you can't start birding until 11 in the morning and it's all over by 3:30. Early February you're looking at about 9-5 in daylight hours. The weather is very unpredictable, you might get sunshine and -10°C (as my brother did when he came over from Australia in February), you might get +10°C and drizzle or you might get literally hurricane force winds and sleet as Steve Lister did when he came in March (he also had warm sunshine one day too - it's a mixed bag). In fact read Steve's trip report here
http://www.birdtours.co.uk/tripreports/iceland/iceland2/ice-mar-05.htm
January and February are, however, very good times to see your target birds Harlequin, Barrow's Goldeneye and Gyr Falcon. Harlequin is easy, Barrow's should be easy at this time of year, and Gyr Falcons are seen in Reykjavík in winter but you may have to work a little bit for them. As for other birding, then you'll see more Glaucous and Iceland Gulls in one day than you'll see in a life time's birding in the UK. Steve Lister counted over 1,000 in Reykjavík harbour on one day and there are many many thousands more in the general area.
However, the
best time to visit Iceland for a first time visitor is undoubedtly late May into June. All breeding birds are back, auks are on the cliffs (Brünnich's Guillemot is very rare in winter but there are several hundred thousand pairs in summer), breeding waders are noisy and conspicuous (50,000 pairs of Red-necked Phalarope for example) and Iceland's special ducks are very easy to find. Gyr Falcon can be found if you go the right areas (not in summer in Reykjavik). We had two excellent sightings on a recent trip I led in NE Iceland. You've also got 24 hour daylight at this time of year. This picture was taken at 01:50 a.m for example
http://www.hi.is/~yannk/myndir/rarity/yk_tadfer260605.jpg
What Iceland lacks in number of species, it makes up for in number of individuals and many species have massive breeding populations. I think it's safe to say that you'll see the odd Golden Plover or Whimbrel if you come in late May. Furthermore, with relatively few birders you've got a good chance of finding something yourself.
There are no whalewatching trips in winter, and they don't start going until May. As Anna says May was unusually cold in N Iceland this year but Húsavík usually provides excellent sightings of whales in June 2003 they had 10 different Blue Whales on one trip! Late May is an excellent time to see Killer Whales off western Iceland too but July is the month for Blue Whales.
So basically late May would be the best time for birding, June and July for generally enjoying the countryside but it's certainly possible to come here in February. Let me know if you want any more info.
E