Well, there are many, many things wrong with the BRP OGL that have nothing to do with cloning their games, but that has been discussed to death elsewhere and it has nothing to do with the Dragonbane licence, so I won't dwell on it here.
If you were originally thinking of Dragonbane as the system, you could also try the FTL which is being discussed on another section of these forums.
By the way, I'm not sure the licence wouldn't cover a setting book as long as it requires the use of the Dragonbane rules, especially if it also contains adventures. The licence even allows the addition of rules, as long as they don't replace the core rules. So you could have new monsters, magic items, new spells... all the sorts of things adventure modules traditionally include. It would of course depend on how radically different your setting is from the Misty Vale, but I think the line between 'module' and 'gazetteer' in this case would be quite fuzzy.
It would be nice to clarify this in the licence text, though.