Although there has been talk about building a railroad connecting the international airport at Keflavík with the capital at Reykjavík, no one has laid any rails yet. The funny thing is that there have been Icelandic/English phrasebooks with entire sections on how to catch a train in Iceland. Too bad that there has never been a railroad with passenger service in the island nation.
The locomotive in the photo above was used to help load and unload ships in the Old Harbor area of Reykjavík. It rests on some narrow-gauge rails not exceeding some twenty feet in length.
If you want to get around Iceland, you just may have to take the bus.