Where and when is Silent Hill: Townfall set?
In Scotland in 1996, on an island town called St. Amelia. Steam, Annapurna and Screen Burn all carry the same official paragraph, so the place and the year are not in dispute.

Why Scotland
“Scotland is where we grew up; it’s the environment most familiar and natural for us to depict.”
Jon McKellan, writer and director. From PlayStation.Blog: the developers on the Scottish setting
He adds that Scotland is naturally foggy, which he calls a fit for Silent Hill. The producer, Motoi Okamoto, gives the publisher’s side: the series works with studios around the world so it can blend different regional cultures and perspectives. The studio itself is based in Glasgow. Said in PlayStation.Blog: the developers on the Scottish setting · Studio location on Screen Burn game page
PlayStation.Blog’s hands-on report says Screen Burn visited and photographed real coastal towns in Scotland to recreate their look and feel. It does not name them. Said in PlayStation.Blog: hands-on report
Is St. Amelia a real place?
Box 2 calls the town fictional, and box 1 puts it on an island without naming a real place. Box 3 is the only mention of a real village, St Monans in Fife, and it is Wikipedia’s alone; the article cites The Herald for it, and that piece is not among this site’s sources. Box 4 is empty, so a real model is one source’s claim, not a confirmed fact. Box 2: Collider: hands-on preview · Box 3: Wikipedia: Silent Hill: Townfall
What 1996 means for the story
Not stated. The year appears in the official copy and is not explained there. McKellan does say the team has a real fondness for older analog gadgets. The in-game pocket television is on the CRTV page. What would change this: a studio interview that speaks to the year. Said in PlayStation.Blog: the developers on the Scottish setting
The copy opens with Simon being called back to the island; who plays him, and the other named roles, are on the cast page. The studio and its earlier games are on the developer page. How the town looks through the player’s eyes is on the first-person page.