I travel back and forth to Iceland quite regularly. Was there last in March. October will be cold, so dress like Irish winter, expect temperatures to hover around 5 to 10 degrees, but its the wind that makes it cold.
The tourist season runs from May till September so you may find lesser visited attractions to be closed. If it is your first time in Iceland I would recommend doing the 'Golden Circle' bus tour where you get to see Geysirs, Waterfalls and Craters. If you're more adventurous I'd recommend getting a 'Super Jeep' tour. You can do this as part of a group of 4-6 people or as a private tour. I recommend
http://www.natureexplorer.is. The jeeps can go off road into the mountains and onto glaciers. Great fun.
Try and get to the Blue Lagoon, its a bit touristy but worth the trip, very surreal. Also try and visit the area in the Reykjanes Peninsula. You pass this area on the way from the airport and everybody overlooks it.
The Icelandic economy has taken a major dip in the last year so that it is now no more expensive than say going to Paris, London or even Dublin. The value of the Icelandic kronur has dropped, I remember when 1 euro would get you 84 kronur, 1 euro is now worth 118 kronur. Iceland is much cheaper now.
There are a lot of good restaurants and bars downtown and you should be able to find something to suit your pocket. As well as the hotdogs you have to try a Nonnabiti sandwich. Delicious fried bread sub style sandwich, you can find them on Hafnarstraeti downtown.