hi,
I was never on a student permit so the information I can offer is just based on the immigration website (utl.is)
1) you have to be out of the country generally in order to apply for the permit. See here: http://utl.is/index.php?option=com_cont … 27&lang=en
2) Are you asking about allowance to work while on a student visa? As far as I can determine from the information on the site, and the text on the student work permit application itself, there is no limit to the number of hours you can work. However, the permit is only renewable in short stages to match your student permit, and isn't good for working towards permanent residence. See application here: http://utl.is/images/stories/Vegna_nams.pdf
3) finding housing is very tricky, but there are lots of websites that have sprung up to help students find housing. I can't see the link you posted but I don't know any students who got housing that way. Generally either rental sites (leiga.is, leigulistinn, bland.is or the HÍ sites seem to be popular, as well as facebook groups).