Indeed, it's a really bad smell (urea and amines still very much in the odor).  The place we went has a reputation for having "better" hakarl.  My son ate 5 of the 6 pieces and said he liked it enough to do again on some future visit.  I had the 6th piece, and while I didn't love it, it was a bit sweet on first taste, and I chewed and swallowed fast enough to not savour it.  We both felt fantastic on the plane ride home the next day.  

As for the 12 Tonar record store, they do have a full cafe upstairs.  It's now a functioning cafe with stuff for sale, but it prior years, it was a bit smaller, and they'd offer you an espresso and just talk music for a while when you visited.  I've been there a couple of times and found some very nice and fairly rare music from bassist Skuli Sverrisson among other things.  They have a solid classical section, lots of ECM, plenty of local Icelandic music, and a well-curated vinyl section in the basement with more commercial rock.  They had vinyl of David's "Bedtime Stories."  Since I already own it, I didn't buy that one.  Also in the basement, they have several really nice couches and a chess set.  Just a wonderful place.  On many summer weekends, they host live music in the backyard, sometimes Icelandic folk music and sometimes jazz or singer-songwriter stuff.

And although somewhat tourist-y, we enjoyed the "Lebowski Bar."  It even had a full bowling lane on the wall (!).   This really helped tie the room together.