As Dylan Pahman helpfully reminded us earlier this week, Iceland's new anti-porn initiative is economically infeasible. As laudable as might be the intentions behind such legislation, the fact is, quite simply, that making pornography illegal without also curbing a culture of promiscuity "limit[s] the supply side of such an immoral market" while simultaneously "undermin[ing] such efforts on the demand side." Very well said.
I'll go a different direction: the case of "ultra-liberal Iceland" (to use The Economist's phrase) attempting to weed out formal sexual exploitation—pornography, prostitution, etc.—while at the same time promoting sexual frivolity in almost any other practical situation, indicates the type of evil that pornography is taken to be. Namely, unlike illicit (e.g., promiscuous, extra-marital) sex, which arises mostly from lustful passion, the sustained commodification of sex, which requires much sobriety and careful planning, is a different type of social shortcoming—one that even involves clear, malicious intent.
What's more, such malice is visible despite a cultural anesthetization by "pro-sex" propaganda. This suggests that the evil of pornography is not only practically, but even theoretically knowable. (Iceland's pro-same-sex laws do not undermine this realization; although they too will hopefully succumb to it in due time.)
It may be worth noting, as well, that the clear malice of pornography has nothing to do with consent (or lack thereof) on the part of those "performers" involved. This is a separate moral issue. What the case of Iceland helps to show is that the very type of action that produces pornography (as well as organized prostitution, etc.) is not only unhealthy, but even consciously and willfully harmful. Perhaps not everyone producing commodified sex is free to understand that; however, at the very least, Iceland's abrupt distinction between a culture of personal pleasure and the reality of formal objectification indicates a degree of wrongfulness in the latter that transcends mere habitual or base gratification.