What is the primary setting in The Scarlet Letter, and what is its corresponding mood?

Is it not
ironic that a religious sect that sought freedom to practice their beliefs in England came to
America where they built a settlement and placed as one of the first buidings a prison? 
Hawthorne conveys thisin his description of the second paragraph of Chapter I:

The founders of a new colony, whatever Utopia of human virtue and
happiness they might originally project, have invariably recognised it among their earliest
practical necessities to allot a portion of the virgin soil as a cemetery, and another portion
as the site of a prison....The rust on the ponderous iron-work of its oaken door looked more
antique than anything else in the New World.

That this
prison has been built as the first construction indicates the hypocrisy and the restrictiveness
of Puritanism, a motif that is prevalent throughout Hawthorne's novel.  With this restrictive
and iron prison, the setting conveys the harsh control exerted upon the Puritan colony.  But,
before this "ugly edifice" is a small plot of ground where grass grows and a single
rose-bush.  Hawthorne writes of this rose-bush,

It may
serve, let us hope, to symbolise some sweet moreal blossom...to relieve the darkening close of a
tale of human fraility and sorrow.

This grass-plot is occupied by grey
figures in "grim rigidity that petrified the bearded phsiognomies" of the
people....there was very much the same solemnity of demeanour on the part of the spectators; as
befitted a people amongst whom religion and law were almost identical and in whose character
both were interfused.

Clearly it is a dismal, prison-like
setting into which the reader is introduced to Hawthorne's "tale of human fraility." 
The people are clad in grey like the prison door, suggesting the cold rigidity of their lives, a
passionless existence.  Only one red rose, a symbol of passion, blooms in the prison
yard.