I cant personally speak regarding Iceland but I did live in Norway for a few years and I continue to work in primarily Norway but also Denmark. Both of which are extremely Capitalist but with a strong welfare state. I also wish we had a model based on what I see in Norway, but as you mention the model is not perfect, but it would be far far better than anything the SNP or Labour is offering. Labour, primarily, is purely socialist, that model is doomed to failure like all the other socialist/communist experiments that came before it. The SNP wish to emulate this to some degree but maybe not to quite the same level but the SNP are in no way considering following the Nordic Model. I could list a plethora of examples of what is considered normal in Norway yet would be viewed as either right-wing or extreme right wing here in the UK.
Scandinavian countries (Norway and Denmark anyway) also almost exclusively require both partners to work full time. I was quite taken aback to see so many small children dropped off at ''barnehage'' way before School hours started and left there after School time finished. As the kids get older, ie 10 years old they are expected to feed themselves in the Morning, left themselves out the house and go to school. Then after School let themselves in and make some food for themselves as both partners need to work full time. As both partners work babies are routinely dumped on child minders from before they are 12 months old because the parents need to return to work. They dump the babies off before work then collect them after, just in time to but them to bed. They see it as normal, I find it very sad.
Then we have the Scandinavian suicide rate, all which are higher than the UK. Finland, which is often touted as the most Socialist of all the Scandinavian countries and also the happiest country on earth also has the highest Suicide rate out of all Scandinavia, 13.8 people per 100,000.. Could the country be so happy as all the sad people feel like they need to kill themselves? Who knows? Iceland is a smidge behind Finland (13.3) The UK, at almost 70 odd countries further down the list has about half the Suicide rate of either of the two countries (7.6).
But all told I would welcome the Scandinavian Model, but we as a people are simply not interested nor ready for that kind of personal responsibility. We live in a Nanny State and have grown so dependent on the state that I just cant see how we could dig ourselves out of that hole.
But Socialism does have a 100% failure rate. Scandinavia is not Socialist.