The sentence provided, "Dorothy saw a scarecrow in a Munchkin," seems to imply a location rather than a specific space or area.
How to explain
If you aim to emphasize the specific location or area within Munchkinland where Dorothy saw the scarecrow, you might modify the sentence to something like, "Dorothy spotted a scarecrow in a corner of Munchkinland," or "Dorothy encountered a scarecrow amidst the fields of Munchkinland."
This revised phrasing specifies the location within the broader area of Munchkinland where the scarecrow was seen.