The street sale license info is available here. It looks like you'd have to pay 20000 ISK per month for the license to sell in the downtown area. The other types of licenses are for vehicle sales (flowers, ice cream, vegetable market):
I know several small-scale artisans here and none of them have chosen to go that way. The weather, even in summer is quite unpredictable, so selling outdoors can be uncomfortable for you and often not conducive to lingering and browsing on the part of customers.
The more comfortable way to have your own sale space is to get a booth at Kólaportið. It's only open on the weekend and has very high foot traffic. You'd be among food shops, used clothing & books, and plenty of other handcraft people. The place is well known among locals and advertised in pretty much every guide book as well. You might be able to team up with someone else for a booth. Info here on prices and availability:
The other way my friends sell their wares is through tourist shops downtown. For the most part this means that they supply a regular stream of new goods and the shops basically double the price. Some shops also accept one-off items (at least the knitting association seems to do this) if you only have a few things to sell now and then.
Surviving Iceland
