Al Jazeera's David Chater, reporting from Hvolsvollur in southern Iceland, said there was an eruption with a large amount of fresh lava flowing from the volcano early on Tuesday.
"We are seeing a spectacular light show right now ... fresh, huge bursts of lava flowing over the rim in front of me. There is fresh volcanic activity."
Conditions at the volcano were constantly changing, with a much heavier cloud of ash rising throughout Monday and drifting towards the Atlantic, our correspondent said, in marked contrast to the previous day.
And scientists from the University of Reykjavik's geophysics department told our correspondent that they were having trouble interpreting the mixed signals coming from the volcano.
Britain's National Air Traffic Service (Nats) said early on Tuesday that the volcano eruption in Iceland had strengthened and a new ash cloud was spreading south and east towards the UK.
"This demonstrates the dynamic and rapidly changing conditions in which we are working," it said.
In a bid to bring stranded Britons home, Gordon Brown, the British prime minister, announced on Monday that he was dispatching royal navy ships to France and Spain.
The aircraft carrier HMS Ark Royal and amphibious assault ship HMS Ocean were made available for those stranded in France, Brown said.
In addition, the assault ship HMS Albion was en route to northern Spain to pick up British troops returning from Afghanistan, and Brown indicated that it could retreive stranded British civilians too.
Push to fly
The latest eruption and volatility came after European officials moved to reopen airports and resume flights.
At Reykjavik University scientists struggle to predict the behaviour of the volcano
European Union transport ministers reached a deal during a crisis videoconference on Monday to divide northern European skies into three areas: a no-fly zone immediately over the ash cloud; a caution zone "with some contamination" where planes can fly subject to engine checks for damage; and an open-skies zone.
Peter Ramsauer, the German transport minister, said all aircraft under the "control zone" plan will be thoroughly checked once they have landed.
"Much stricter tests and checks will be applied to all planes," Ramsauer said, in hopes of gaining more data about the risk from the ash.
Airports in central Europe and Scandinavia have already reopened, and most of southern Europe remains clear, with Spain volunteering to be a staging-point for travellers trying to get home.
Three KLM passenger planes left Schiphol airport in Amsterdam on Monday evening - under visual flight rules - bound for New York, Dubai and Shanghai.
Visual flight rules allow a pilot to fly without reference to instruments, if weather conditions are good enough so the pilot can see landmarks and avoid any other aircraft. Those flights need to be under 18,000 feet, lower than usual altitude for commercial traffic.
In France, Francois Fillon, the prime minister, announced "a partial reopening of the airports north of the line between Nantes and Nice, which will allow a progressive return to normal traffic" on Monday.
"Air corridors will open between Paris and airports in the south, notably Bordeaux-Paris, Marseille-Paris and Nice-Paris from 8am on Tuesday [06:00 GMT]," he said.
In Germany, Lufthansa said it had received special permission to fly 15,000 passengers home to Frankfurt, Munich and Duesseldorf from Asia, North and South America, as well as Africa.
But a spokeswoman for Lufthansa, Europe's biggest airline in terms of passenger numbers, stressed that the 50 long-haul flights were exceptions and "not a return to normal flight service".
Siim Kallas, the EU's transport commissioner, said "we should see more planes starting to fly" from Tuesday morning.
In Britain, Nats said Scottish airports should be available from 06:00 GMT and more airspace over England may become available from 12:00 GMT, although not as far south as the main London airports.
The move to ease flight restrictions had come after criticism from carriers, who said test flights in recent days by airlines including KLM, Lufthansa and British Airways suggested planes could fly safely despite the ash and that the danger was exaggerated.
None of the test flights reported problems or damage.
Willie Walsh, the British Airways chief executive who flew on the carrier's test flight, said on Monday that "the analysis we have done so far, alongside that from other airlines' trial flights, provides fresh evidence that the current blanket restrictions on airspace are unnecessary".
"We believe airlines are best positioned to assess all available information and determine what, if any, risk exists to aircraft, crew and passengers."
Critics also said Monday's co-ordinated action among European officials came too late, with the chief of the International Air Transport Association (Iata), Giovanni Bisignani, calling the whole situation "embarrassing and a European mess".
Iata accused European governments of offering "no risk assessment, no consultation, no co-ordination, and no leadership."
"We are far enough into this crisis to express our dissatisfaction at how governments have managed the crisis," Bisignani said in Paris.
Under the EU agreement, aviation authorities will carve airspace above the continent into three zones:
Zone One: Closest to ash cloud - air traffic completely banned
Zone Two: Partial restrictions on flights
Zone Three: Free of ash - full resumption of flights
"It took five days to organise a conference call with the ministers of transport."
The group urged governments to more urgently "focus on how and when we can safely reopen Europe's skies" - such as through more in-depth study of the ash cloud to identify safe corridors for planes.
But pilots urged caution.
"Mixing commercial and safety decisions risks lives," said Philip von Schoppenthau, secretary-general of the European Cockpit Association, a union representing 38,200 pilots from 36 European nations.
"Our members have many firsthand experiences of the extremely abrasive and clogging effects of such clouds," he said.
A senior Western diplomat also said on Monday that several Nato F-16 fighter jets suffered engine damage after flying through the ash.
The official declined to provide more details on the military flights, except to say that glasslike deposits were found inside the planes' engines after they patrolled over European airspace.