Iceland in October - accommodation recommendations

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We've got a week. Kids will be 5 and 7.

Hotel or guesthouse or apartment? Stay in Reykjavik or split between 2 places?

Any recommendations? Many thanks!

I went in October several years ago & organised accommodation through 'discover the world'.

It was beautiful and the weather was fine & clear but chilly.

Lots to see & do but take plenty of money because is was VERY expensive

Went last Dec stayed here
www.bluemountainapartments.is
Cant fault it, bakery and supermarket over the road, we lived on Pizza as they eat some weird stuff and its very expensive, soup and coffee over £40!
I don't think the Blue lagoon is worth the money as loads more that are as good and cheaper.
We hired a car it had studded tyres and was no problem in the ice.
The Golden Triangle thing is excellent but a long drive if its bad weather.

We stayed here Stay Apartments Einholt a few years ago with DC being 2 and 5. DCs were on a futon couch and we were in a bed. Decent kitchen and nice bathroom. 5 min walk to the main street in Reykajvik. Since DH and I had been before, we wanted the apartment since eating out is very expensive. We had a car rental too.