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First encountered: p 432, Introducing Philosophy for Canadians: A Text with Integrated Readings (2011 1 ed).
Primary Source: Section 1, Groundwork for the Metaphysic of Morals (1785) by Immanuel Kant
Translation: p. 6, (2008) by Jonathan Bennett

The good will of this person would sparkle like a jewel all by itself, as something that had its full worth in itself. Its value wouldn’t go up or down depending on how useful or fruitless it was. If it was useful, that would only be the setting ·of the jewel·, so to speak, enabling us to handle it more conveniently in commerce (·a diamond ring is easier to manage than a diamond·) or to get those who don’t know much ·about jewels· to look at it. But the setting doesn’t affect the value ·of the jewel· and doesn’t recommend it the experts.

I do not understand Kant's distinction between the jewel and its setting, and this allegory of him to analogise good will.

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Actual content of the quote

First, the original quote in the Cambridge Edition, as it is a lot more truthful to the original than your quote, which reads like a paraphrase:

Even if through the peculiar disfavor of fate, or through the meager endowment of a stepmotherly nature, this will were entirely lacking in the resources to carry out its aim, if with its greatest effort nothing of it were accomplished, and only the good will were left over (to be sure, not a mere wish, but as the summoning up of all the means insofar as they are in our control): then it would shine like a jewel for itself, as something that has its full worth in itself. Utility or fruitlessness can neither add to nor subtract anything from this worth. It would be only the setting, as it were, to make it easier to handle in common traffic, or to draw the attention of those who are still not sufficiently connoisseurs, but not to recommend it to connoisseurs and determine its worth. (Groundwork for the Metaphysics of Morals, Ak. 4:394, Cambridge p. 10)

It is all about the value of a good will, which is absolute, whereas usefulness is always relative and depending on actually willing the end. This is explicitly addressed later:

All objects of inclinations have only a conditioned worth; for if the inclinations and the needs grounded on them did not exist, then their object would be without worth. The inclinations themselves, however, as sources of needs, are so little of absolute worth, to be wished for in themselves, that rather to be entirely free of them must be the universal wish of every rational being. Thus the worth of all objects to be acquired through our action is always conditioned. (Groundwork for the Metaphysics of Morals, Ak. 4:428, Cambridge pp. 45-46)

Regarding the metaphor

I think the reason why Kant is using this picture here is that Jewels are, or at least have been for commoners, the closest to what he calls absolute worth. The setting, e.g. in a ring, crown or necklace, does not really increase its worth, it just makes it more handy. People knowing the worth of Jewels know this and only look at the Jewel itself in order to determine the worth, but others will only consider the worth of the piece of jewelry as a whole, as they would not be able to admire the jewel as such as it would be quite useless in their eyes without the setting.

That's how it works with the good will as well: People understanding morality admire the morality and goodness of the will, while others always ask the question what positive outcomes he could expect, i.e. how useful his actions were.

Conclusion

The main point to see here that Kant wants to point out in this part of the book is that while morality does not exclude usefulness (the jewel may have a setting), the worth of an act is only determined by the good will (the jewel that shines for itself) and usefulness must not be considered for evaluating the moral worth of an act (the setting must be set aside). But for people always asking for usefulness, the setting may be useful (sic!) in order to at least acquaint with the shining of the jewel/morality (and the admiration/respect it produces).

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What you mean by "setting" is the band of the jewel, literally the kind of metal the jewel is placed in, which makes it a piece of jewelry, and wearable.

Kant is saying that morality is not an an adornment or a piece of jewelry, but rather the jewel itself which doesn't need to be cased in metal in order to "shine" through, or for it to be usable.

Diamonds, for example, are a very durable and hence useful material (our dentists use diamond bits to drill our cavities) and diamonds are also the jewel of all jewels, which is to say the one with widest circulation economically and the one most widely esteemed (culturally). (Diamonds are also notorious for the dehumanizing and inhumane working conditions of the miners. These miners are often children.)

It also seems to me that Kant is critiquing both materialism, of market value and of wealth as well as the love of commodities, and utilitarianism. He is defending a kind of greater wealth which comes from the perfectly good will. The perfectly good will is beyond both utility (we already know we can't find the perfectly good will empirically) and economic value (it's ridiculous to assign a market value to a good will). (As it is, justice is not a path to wealth, otherwise the world wouldn't be so rife with injustice and poverty.)

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