That looks like a pretty nice deal. I don't think it was an option when I was looking into it, so it's new.
I think you'd have to contact DEFRA to see about extra fees. I know for Virgin there's a handling fee (~£300?) at the Heathrow end. British Airways includes this fee in their prices, but I would guess Icelandair doesn't since they're just going off excess baggage fees, so that's quite low already.