Of all the hotels and B&Bs we stayed in during our Iceland trip, this one offered the poorest value overall. It was about twice the price of any other accommodation we stayed in, but didn't make up for the extra cost in terms of its fairly basic offering. On reflection, this is the only hotel we wished we had chosen somewhere else.
Overall it's a nice enough hotel, easy parking, friendly and helpful staff, and the room was fairly well-appointed and clean. The breakfast had a good range of options and was of decent quality. The location is convenient as a base for sightseeing, but it's not the best and most central part of town (although the town is small enough that getting around is easy).
Others have already mentioned the dreadful WIFI. It seemed to work near the small lobby area but that was it. Staff on reception said they "are hoping someone would be coming to fix it tomorrow" - given the number of reviews mentioning poor WIFI, I suspect tomorrow never comes.
Both evenings we had dinner in Talknafjordur, and with the outdoor hot pool there and the town's setting on the water too, we would probably choose to stay somewhere there instead (although it's only a 15 minute drive from the Fosshotel over the mountain pass).