One of the outlaws mentions the Yaqui Indians. The Yaqui lived in the Río Yaqui valley located in the northern Mexican state of Sonora and into the Sonora Desert of what eventually became Arizona. Sonora's western border is the Gulf of California, known to locals as the Sea of Cortez. This area could fit in as the location for this episode so long as we postulate a no-longer-extant town of San Blas there.
Having to send to Santa Fe, the territorial capital, for legal or political guidance was one of the more common problems of administering the huge New Mexico territory. Following the Gadsden Purchase, congress established Fort Buchanan and later nearby Fort Crittenden to little effect and both forts were closed by 1873.
It is this very lawlessness that often helps Caine in his exploits at least as often as it lands him in trouble.
There is a San Blas on the Pacific coast of Mexico but it it about 1500 miles south of El Paso, Texas, and 1200 miles south of Santa Fe. It seems unlikely this episode would take place anywhere near there especially as Caine says to Staggers, "I will not go with you to Mexico."
It's not stated that the pebble Caine puts on the grave here is the one he took from Master Kan's hand or Master Po's grave, but either is very unlikely given his attachment to them.
The nearest U.S. Marshal is said to be in Santa Fe, New Mexico but this episode is set around the ocean. If one were to believe this were California's coastline, then presence of law would be much closer.
Caine: You own nothing so that you may be owned by nothing.
(commenting on Po's death and Caine's departure)
Master Kan: Now, you must leave us forever and I cannot say which is the greater grief to my heart.
(commenting about Caine wanting pebble in his hand)
Master Kan: The universe contains a certain pebble called the earth and many men have formed an attachment to it no less foolish than your own.
Guest star William Smith had filmed an eight-minute audition portraying Caine, before this series begain, wearing prosthetic eyepieces to make him look Chinese. ABC had Smith in mind for the part, but Jerry Thorpe thought he was too musclebound and mean-looking.