Nodnol is never actually seen in Backwards, just referenced on a sign first spotted by Kryten and Rimmer, then Lister and The Cat which says they are 178 miles from Nodnol. Kryten and Rimmer correctly deduce that they are on a backwards version of Earth, while Lister and the Cat believe that they are in Bulgaria The main setting seems to be Retsehcnam (Manchester), as evidenced by the accents of most of its inhabitants, notable local landmarks and Manchester being roughly 178 miles from London.
The pub where they were performing when Lister and The Cat found them was called Nogard dna Egroeg eht and was located in Teerts Gnilpik, where Lister got involved in a "bar room tidy" - the reverse of a barroom brawl. (Backwards, Series III)
- Nodnol is of course backwards for London, but is apparently not the setting of the story, the Red Dwarf crew are able to easily travel between the city and the woodland where Starbug crashed.