Is the general setting of the "Yellow Wallpaper" as important as the room in which the lady is found in?
Note the description of the setting: "It is quite alone, standing well back from the road, ...there are hedges and walls and gates that lock, and lots of separate little houses for gardeners and people." The description of this larger setting holds symbolic meaning for the narrator's situation: she is quite alone, she is away from the lives of others ("the road"), she is imprisoned in herself and in her room (the hedges and walls and gates that lock), and although others are nearby, no one can / does help her.
Indeed they are. The family has retreated to this setting--open, airy, no stressful surroundings--in hopes that she will recover. Instead, she retreats into the room with horrid yellow wallpaper that is ripped and water stained until she begins to rip it away herself in order to "find" the woman moving around behind it. It is ironic that they go there for her rehabilitation and it only serves to drive her more insane.
Although the room with the yellow wallpaper is of obvious primary significance, other parts of the setting are important as well. For example, the time period of the story is part of the setting and is crucial for understanding the Gilman's message about the role of women and the treatment of those who are mentally unstable. Also, the things the woman sees out of her window play an important role in the story as well.