I'd think Rexalia is everything east of Crusand. And ... since they say Crusand has been gaining territory, they probably have the a bigger part of the peninsula that the map shows.

I'd think the dots represent where the capital is, since we know Gadoria's capital was kinda close to the water.

Maybe they were stuck in Gadoria because they couldn't get part the Crusand-Rexalian border? I have no idea. =\