We went to Iceland last summer, rented and flew around in 5 Cessnas. Had planned on flying formation all the time, but decided against it, the workload would be too high, especially when tumbling around the sightseeing spots.
What we ended up doing was flying OUT of any CTR (control zone) in loose formation. Reason was unfamiliarity with the airspace, easier just to follow the leader. Once out of the CTR, we'd break up into a even looser formation, say 1 NM separation.
Was still tense, everybody was afraid of colliding.
Anyway, would recommend anyone going there and seeing the vast beauty of the landscape. Seen it all from the ground, but even more beautyful from the air.