Where does the story take place?
The Eyes of the Dragon takes place in Delain, a fictional kingdom which seems to resemble a medieval fiefdom or feudal structure. It certainly has a "fairy-tale" feel, and many of the plot elements (evil magician, unfairly imprisoned but ultimately vindicated prince) are archetypes of the fantasy genre. As the previous poster noted, Delain and the adjacent land, Garlan, are located in In-World, the homeworld of Roland Deshain of The Dark Tower series. There is also a suggested similarity to the Territories in The Talisman, which King wrote with Peter Straub. As the previous poster pointed out, The Eyes of the Dragon was written for King's daughter & Peter's son, Ben Straub. The characters of Naomi & Ben are named after each child.
The similarity between "Delain" & "Deshain" has been noted...perhaps suggesting King wanted a more concrete connection between the two stories. Roland is also the name of the king in The Eyes of the Dragon, another link. Finally, Flagg is a character that appears in several King novels, including The Dark Tower and The Stand. This book serves as an example of the intertextuality of King's writing, with Delain connecting to several other stories & worlds.
A specific location, in terms of a particular town or village, is not given. Obviously, the setting is in a location where Spanish is the primary language. It is along the coastline, in an area that is visited by tourists. The Gulf Stream is within the range of fishermen and their boats, which places it somewhere along the eastern side of the North American continent. After Santiago hooks his great fish and begins to consider where it might be towing his boat, he realizes that he can use the glow of lights from Havana to orient himself if needed, so he has to be somewhere near Cuba. In my opinion, Santiago's home village is located somewhere on the Yucatan Peninsula of Mexico.
I'm guessing you're referencing the fantasy book The Eyes of the Dragon by Stephen King. This story, written for his daughter, is about two brothers struggling for the crown in the fictional world of Delain. Delain is part of a much larger realm known as the "In-World," a world that exists within, or adjacent to, our reality. King used In-World as the setting for his Dark Tower series as well, and Flagg, the antagonist in The Eyes of the Dragon, appears in many of King's linked novels.