I stayed in a single room. Decent size considering what you pay - bed, desk, chair, electric kettle. The advertised fridge is very small, does not easily fit a 1.5 liter bottle, has a freeze box built in but is not reliable (melted icecream). The curtains were so-so, they block out most of the light but the room won't be completely dark. Bed was decent, not exactly the highest quality but a firm mattress which I like.
Shared bathrooms/showers were clean (apparently cleaned several times daily) and well-dimensioned for the number of guests (I never had to queue).
The location is good. The hostel village consists of several houses, but all of them are directly neighbouring the main building/reception at Flokagata 1 so for planning purposes you can assume that you are staying there. The location is just outside of the city centre, about 5-10 minutes walk. About a similar walking distance to the BSI bus terminal (Flybus, etc) and to the Hlemmur bus station (Straeto buses) if you want to make excursions. Just outside of the big Klambratun park if you just want some place to chill and watch Icelanders. The only drawback is that there aren't any super close cheap supermarkets, for that you either have to walk to the city centre (again, not far) or to the Kringlan shopping centre, or you will just have to settle for the slightly more expensive 24/7 supermarkets.
All in all, if you are looking at a cheap place to stay I would recommend Reykjavik Hostel Village.