How is the overall setting in "A Very Old Man With Enormous Wings" important to the rest of the story?
I can't find a good way to illustrate the importance of setting to the entire story effectively at all.
The setting quite important to Marquez's story. Recall that the full title is "A Very Old Man with Enormous Wings: A Tale for Children."
Marquez is writing a fairy tale and sets it somewhere in South America, presumably Colombia as that is where he is from (much of his writing is set in his homeland). Fairy tales are all about moral instruction, and those who benefit from their lessons are more likely to internalize them if the surroundings are ones with which they are familiar.
In Pelayo and Elisenda live a marginal life on the sea shore. They catch crabs and other sea life for their living. This sort of trade will be very familiar to native readers.
The setting is also important because of the types of people who come to view the angel. Colombia is largely Catholic, so it makes sense that Father Gonzaga, the priest who comes to assess the "miracle" will be the local parish priest (who attempts to verify the angels authenticity by speaking to him in Latin, supposedly the language of celestial beings.)
Colombia, like many other South American countries, exists between two worlds: that of Catholicism and the older world of superstition. The tales about the spider-girl are Old World tales, every bit as believable to superstitious people as the existence of angels.
The traveling carnival is also a feature of South American life, and it is this carnival which brings the spider-girl and her sad tale of woe and warning.
These are the primary reasons setting is important for Garcia's tale.