Hi. I'll dive right in. I would suggest definitely hiring a car. The train system is great and is by far my favourite way to travel, but if you want to see the countryside, especially up north, you'll need a car. Within Glasgow (pronounced Glas-go not Glas-GOW) and Edinburgh (Edin-burah not Edin-burg) public transport is pretty good if you know where you're going. Parking is hard to come by and very expensive in both cities. I don’t know what driving is like in Iceland, but the rules of the road are different enough here compared to Canada that I try not to drive in the cities.
There is ample hiking to be done in the Scottish countryside. I would recommend the northwest highlands or the Cairngorms, but the options are endless as you have "the right to roam" according to Scottish law. This means that as long as you are acting responsibly and respectfully you can hike just about anywhere. Here are some information sites about hiking (known here as hill walking) in Scotland.
http://www.ramblers.org.uk/scotland/our … -scotland2
This link is for the Islay (pronounced Eye-lay) Whisky Festival.
Islay is a whisky region and if you have the time this is well worth a visit. It's on from May 25th to June 3rd. It is in a rather hard to reach location so if you're thinking about going, plan ahead.
For castles I would recommend the countryside around Dumphries (pronounced Dum-freece). It's a quiet farming area and doesn’t have a lot going on otherwise, but it is the area of Hadrian’s Wall and therefore has lots of castles that were actually used for defending the border as opposed to many "castles" throughout the country that are simply big, old houses. Not so in this area. Caerlaverock Castle (I'm not sure how to pronounce that one) is probably my favourite. It even has a moat.
In terms of bars and restaurants I'm only going to comment on Glasgow because I don't know enough about Edinburgh nightlife to speak truthfully. This is a subject I could ramble on about for quite some time so I am going to force myself to keep it short and direct you to The List. It's very helpful. Although they don't give a lot of bad reviews you can still gage a restaurants popularity by how active the review is for example how many people are commenting, when it was last updated, how frequently it is featured throughout the site etc. http://www.list.co.uk/food-and-drink/ . Off the top of my head I'll recommend The Ingram Wynd for Scottish traditional, Gandolfi Fish for Seafood, Cafe Source or Cafe Source Too for Scottish Traditional, Trans-Europe Café for Breakfast (but the coffee isn't great), Bar Bacchus for beer and pub grub, Blackfriars for Ales, Boudoir for Wine. And a list for whisky bars: The Bonne Accord, The Pot Still, The Ben Nevis, and Dram. This is a fairly hand site for pubs and bars in general http://www.viewglasgow.co.uk/pubs-bars.aspx
I could go on for a while more, but I need to head to work. Any other questions feel free to message me. I hope this helps.