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It could be a bit cold in December, but it'll increase your chances of seeing this.
The only problem with Iceland is that in December, there is about four or five hours of sunlight per day. The flights are very reasonable as the demand is low during the winter months.
If I only had a week I wouldn't go to Europe altho Iceland is a great suggestion. I'd try for somewhere closer to home such as DC, New Orleans, Portland, Charleston.
Chattanooga is a fair distance from the Smokies - will you have a car? It's always beautiful in that part of the world, but I'd suggest other accommodations than camping in December. The mountains are over 6,000 feet; the valleys are equally deep, and it gets cold!
Chattanooga itself has enough attractions and activities to keep you busy for at least two or three days: spend one day atop Lookout Mountain, seeing and doing everything there (Rock City,Ruby Falls, Incline, Battle Above the Clouds-Point Park, Civil War Museum, Reflection Ridings at the foot of the mountain), then hit the aquarium and the adjacent IMAAX the next day, walk over the pedestrian bridge across the Tennessee River to check out the attractions in the newly-thriving neighborhoods across the river, visit the now-docked Delta Queen steamboat, perhaps visit the museums or the Chickamauga Battlefield just down the road or the new archeological discoveries over on Moccasin Bend.
Nashville is also a great place to visit, especially if you're into country music. That's not all that's there, of course, but it's a great draw and a fascinating scene.
I would spend the entire week in Istanbul or wait on Europe until there is more time.
If you've never been backpacking before, winter is NOT the time to start.
Denver is sometimes really nice in early December, but it can also be cold with snow. Not hiking weather.
Would you be open to another suggestion? Consider New Orleans or Key West. Both are great places for a younger guy to explore where you won't need a rental.
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