They - who are you talking about?
If by They you mean Xenonauts, they were created after Iceland, so how could they have access to ICBMs and Phantom prototypes before the incident?
Otherwise, if you mean regular NATO forces, then ICBMs and Phantoms weren't proven technology and were not available in the numbers mentioned, 'squadrons', which usually implies about 12-18 aircraft per squadron, or the half a dozen ICBMs launched.
The F-17 can be explained through your logic but these aspects are incoherent and inaccurate, since the point of narrative divergence between History and the game's storyline is the Iceland incident.
And another plot hole: how could the Soviets detect missiles being launched in 1958? There were no satellites available then that could detect missile launches in the USA (Sputnik had just been launched in 1957) and no radar in the world could detect something as far as the distance between the Soviet Union and Iceland. Since the nuclear explosions took place on an uninhabited part of Iceland, were the Soviets simply lucky to have a KGB agent casually strolling on the Icelandic countryside that saw the explosions and by chance was carrying a long range radio with him? And in that case, why did the Soviets thought that the nuclear attack was aimed at them, if it took place on Iceland?