This documentation describes in detail how to access Icelandic characters, which are contained in all of Apple’s Latin TrueType fonts. As a bonus, you get a multiplication sign (¥) for the useless lozenge (◊).
The system extension QuickDraw GX is required by the program FuseCMAP but can be disabled or removed afterwards.
What to do?
(1) Make a copy of a font suitcase and remove all bitmap fonts from it.
(2) Open the font suitcase with ResEdit and rename all ‘FOND’ and ‘sfnt’ resources (menu “Resource : Get Resource Info”). For example, change “Times” to “Times IS”, “Times Bold” to “Times IS Bold”, etc.
(3) Open the font suitcase with FuseCMAP and choose a font. Next open the file Icelandic cmap. When asked “Which encoding should I replace?”, choose “Macintosh”. Repeat for all fonts in this suitcase.