We talk a lot about the setting in the "Detailed Summary" and the "Symbols" sections, so by all means check those out if you haven't already. For our purposes here, we'd just again underscore the importance of the natural environment to this rural scene, as well as the way it both affects, and is seemingly affected by, the couple in the poem.
The big picture of this poem is that the husband has left the wife, gone "into far Ku-to-en, by the river of swirling eddies" (19). In this sense, we're dealing with a split setting—Ku-to-en, where the husband is, and his home village, where the speaker has stayed behind. And what connects these scenes? Rivers. The husband has gone to one river, but the poem concludes with the wife wondering if he'll return via "the narrows of the river Kiang" (27). So, the same mechanism that has pulled them apart is also the way that they'll likely be reunited.
We bring this up because the push-pull that the rivers represent for the husband and wife in the poem (pulling them apart, but potentially pushing them back together) gives us a good way to think about how the setting affects, and is affected by, the wife, our speaker. In the first stanza, we get happy childhood. This is communicated in part within a natural setting that is controlled by the children: flowers are pulled, bamboo is used for stilts, heck—even plums are used for playing games.
But this control over the environment seems to be totally undone in stanzas 4 and 5, in which monkeys make a sad racket, mosses grow over everything, and the air is filled with falling leaves and jerkface butterflies. In short, the setting is directly tied to the speaker's isolated mood. If this is so, then, it gives us pause to wonder whether these two setting descriptions (controlled when happy, uncontrolled when sad) are coincidental to her mood, or whether the speaker might herself influence her surroundings (or at least how she perceives her surroundings).
That possibility is a slim one, we recognize (unless she's Storm from the X-Men, which would be way cool), but it gets at the main point to make about the role of the setting in "The River Merchant's Wife": the natural environment cannot be separated from the emotional reality of the speaker's experience. If you want to know how the speaker is feeling, just check the state of her surroundings.