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What an awesome drawing by codybartfast!
I just want to point out that E5 should be E3, E3 should be E4 and E4 should be E5 in the diagram above. During the evaluation of (set-car! (cdr z) 17), the environment for set-car! is first constructed and the next is the environment for cdr. Refer to Figure 3.5 in 2nd edition for a similar case.
Thank you very much for detailed correction and reference to fig 3.5. I've updated the diagram above and I hope it properly incorporates your correction. Cheers!
codybartfast