Perhaps the setting is important because there *is* no setting?
Anyone can be in disgrace with fortune and men's eyes, anywhere. It's a universal. He may not be the first to fall (Adam and Eve) but when he falls, he feels abandoned by God and man. It may be that the emotional cost is more important than the physical loss, and that by eliminating references to any distinct or recognizable place, the persona is able to focus more intensely on the emotional.
It is an emotional problem that the speaker faces, after all: he's envious. He wants to be like anyone else but himself. He's depressed and irritated; he almost loathes himself. To carry on with sullymonster's interpretation, he has utterly fallen from grace, and not just God's grace, or man's, but his own as well. He's lost his power and position in the world, but more to the point, he's lost his confidence, his self-esteem.
This graceless state can be changed, however, when he thinks on his love, an emotional rather than a physical move. Alone, he calls heaven and no one answers his "bootless cries." Thinking of her allows him to change his perception of his circumstances and to be like the lark who sings hymns to heaven's gate. This elevates his mind and distances him from the unpleasantness in his situation, whatever that is.
The cure is not physical. It is not a return to better circumstance, nor is it a gain in material wealth. Instead, it is a shift in consciousness brought about by a recollection of love. Could be that the setting isn't important because the crux of the problem is internal.
The setting of Sonnet 29 is ambiguous, but nonetheless carries heavy connotation. First, consider the religious connotation established in lines 1 - 3:
When in disgrace with fortune and men's eyes,
I all alone beweep my outcast state,
And trouble deaf Heaven with my bootless cries
The speaker is in "disgrace" and is an "outcast". This allusion calls to mind Adam and Eve, and their expulsion from the Garden of Eden. In this situation, the setting is appropriate because the speaker is outside of paradise. He call only "trouble deaf Heaven with ... cries". Original Sin, according the Bible, is the cause of human's unhappiness. It is significant, then, that the human on Earth, outisde of heaven, is able to overcome the sorrow of disgrace and sing happily at "Heaven's gate" (line 12). The speaker might as well be saying "in your face" to the heavenly host. The message is "I've been outcasted but I am happy."
In a more tangible way, the setting of the poem is appropriate for the use of metaphors. The speaker describes himself as a lark that sings happily at heaven's gate. In order to achieve the sense of lifting spirits, in order to demonstrate that the speaker is overcoming his disgrace and feeling happy, the author uses the metaphorical lark, the epitome of songbirds. The lark flies up from the earth as the speaker's spirits soar:
Haply I think on thee,--and then my state
(Like to the lark at break of day arising
From sullen earth) sings hymns at heaven's gate;
Therefore, the setting of the Earth is appropriate for creating this comparison.
This is Sonnet XXIX. The setting is one of solititude and reflection. One can easily imagine the speaker, sitting alone on a hill, isolated from humanity and casting his anguished cries to the heavens. But in the wake of his pain comes revelation. He realizes that others may have wealth, power, and position, but those things do not satisfy the soul. His thoughts turn to his beloved and his heart then sings for joy; he is no longer envious of anything anyone else may have, for he loves and is loved.
Here is the text of the Sonnet XXIX:
When in disgrace with fortune and men's eyes
I all alone beweep my outcast state,
And trouble deaf heaven with my bootless cries,
And look upon myself, and curse my fate,
Wishing me like to one more rich in hope,
Featured like him, like him with friends possessed,
Desiring this man's art, and that man's scope,
With what I most enjoy contented least;
Yet in these thoughts my self almost despising,
Haply I think on thee, and then my state,
Like to the lark at break of day arising
From sullen earth, sings hymns at heaven's gate;
For thy sweet love remembered such wealth brings
That then I scorn to change my state with kings.