Wikileaks: Icelandic Diplomacy at its finest...

So are they going to default or what?
(some of those links are bad)

Default is on the table - in 2011 if nothing happens.
There is now some populist mood to deliberately default, might as well be hanged for a sheep, as it were.

Default is contingent on two things: whether UK and NL insist on playing hardball and insisting on harsh repayment terms, as opposed to ones with flexible scheduling and an interest rate that is cost neutral - Iceland's push right now is that it'd be immoral for UK and NL to profit from the loan arrangement, as opposed to having their costs covered - it was politically imperative for them to settle deposit refunds quickly, not us.
Secondly, no one knows how much the bank assets will yield, and when - longer the wait the better chance of actually getting something back, or just cash flowing long term loans. UK is estimating over 80% and so says the loans are no big deal, but it could 30%.

Other big question is whether the political will and legal process in Iceland will lead to reclamation from the bank management and debtors who got sweetheart unsecured loans, basically "fraudulent conveyance" needs to be invoked.
Problem is that these are all the same people - friends, family, classmates - they need some harsh independent outsiders to come in and sweep out from under the rug.