Theory: Jewelry Land's Location

Abstract
Jewelry Land is situated just north of Grass Land, with the Dark Realm attached as a peninsula to the northwest of the Light Realm.

Arguments

 * Argument 1: Stage 1 is known as Grass Land (Grassland Course in Japanese), and the west portion of Jewelry Land feature hills with eyes similar to those of Grass Lands overworld map. At the end of the game it is stated that Mario and Yoshi return to the Mushroom World, rather than the Mushroom Kingdom.


 * Argument 2: Mario and Yoshi can seemingly walk to the Light Realm. When Mario and Yoshi are sent to Jewelry Land, they walk to the right (presumably east) from Peach (Pic 1). The cutscene only fades black without giving any indication that any other means of travel other than walking is used. Furthermore, after having fought Roy during a free fall from Stage 7 “Floating Castle 1”, King Fret speaks to Mario and Yoshi in front of similar hills seen during the journey to Jewelry Land. This speech could be assumed to take place below Floating Castle 1, i.e. close to Stage 1 “Grass Land”.