Looks like the mushroom kingdom might be that island near the cap and cascade island?
Ooh nice potential find, it does look a bit like a sliced mushroom. It also makes sense that it would be isolated from all the other kingdoms and that would be the closest to Cap which seems to be the first kingdom in the game.
Lunch is thought to be a shortened form of the word Luncheon from middle English. Although nowadays a Luncheon may be organised as a formal midday meal. It's not a combined word.
In the original trailer the kingdom has some kind of ancient Roman/Greek architecture going on so the "eon" in the name might also be a reference to the Pantheon in Rome.