It seems the proxy is working, I've gotten many books for $0 and just tried purchasing one for $0.99. No international wireless transfer fee was applied. The proxy gives me an error when I try to download the books - it's not opening the save as feature correctly. So, on my normal Icelandic IP, I seem to be able to download the books straight to my computer without problems. At least, so far I've not had any trouble.
Thing is, I've yet to get my Kindle. I understand that the first download on it has to be wireless, so that might mess things up. Hopefully I'll be able to sort that out when the time comes.