A description of a setting, such as in Joseph Conrad's "Heart of Darkness" for example, is usually intended to make the reader feel that he himself is actually present in that location. The effect of the setting on the viewpoint character is not the aim of the author; it is the effect of the setting on the reader who is identifying with the viewpoint character that is important. The author is mainly interested in creating an effect on the reader by bringing him into the place where the action is taking place. This is true in such stories as Jack London's "To Build a Fire," in Stephen Crane's "The Open Boat," and in Edgar Allan Poe's very effective use of setting in "The Cask of Amontillado."
In "The Most Dangerous Game," the reader identifies with Sanger Rainsford for two reasons. One is that everything is told from Rainsford's point of view. The reader is confined to that one character's viewpoint, sees what he sees, hears what he hears, feels what he feels. The other reason is that the viewpoint character has a motivation with which the reader can easily identify: his life is in danger and he wants to stay alive. This is a survival story. As the reader identifies with the point-of-view character, he is drawn into the strange setting and that setting has an effect on him which is similar to the effect it is having on Rainsford. A good fiction writer will always try to make the reader feel that he is present where the action is taking place. A vivid description of a setting--the frozen north, the open sea, the Congo, the catacombs--will help to make the reader feel present; but it is essential for the reader to identify with the viewpoint character as well. This is one of the main reasons why we like to read fiction: it transports us away from our mundane world, our all-too-familiar bedroom, into all sorts of different environments--some beautiful, some dangerous, some exotic, some grungy, but all places where we have never been.
Yes, I agree with #3 and its focus on Zaroff's palatial house. Throughout the entire story, not just in the final scene where we see the "game" being played out, the author keeps us in massive suspense, because we are constantly asking ourselves why on earth an urbane, elegant and sophisticated individual such as General Zaroff is living in such an isolated part of the world when he should be living in high society. Such intriguing questions coming from the disparity between Zaroff and his environment clearly maintain and develop suspense.
You have an excellent description (above) of one part of the setting. Another part to consider is Zaroff's house. The home is impressive and totally unexpected in the middle of this deserted island in the middle of the ocean. Once he gets inside, we see lots of indications that General Zaroff is a "civilized" man--one of the great ironies of this story. He wears hand-tailored clothes, eats and drinks the finest foods and wines, he listens to opera. Yet, we have hints--little bits and pieces--that all is not as it appears. These are also elements which create suspense in "The Most Dangerous Game."
First, the setting is an isolated island in the middle of nowhere. It becomes clear to us, the reader, that this location is chosen because of the activity that takes place here, but it also lends to the mood since the victim realizes that he is on his own. It is not likely that he will be rescued since the setting is so isolated.
The jungle is another part of the setting. We all look at jungles as forboding places full of dangerous animals--snakes, spiders, poisonous creatures which can kill with one bite. On this island, the jungle includes those creatures, but also hides the evil spirit of men who hunt other men for fun.
The suspense is created and held because of the victim's ability to think and reason. Where the jungle and the island provide the perfect place for the hunting of humans to take place, it also provides hiding places and natural resources for ambush.