Can the Germans set up extra ground units in E. Prussia(i.e moving from spots on the Polish border)? I'm not sure because of the Same Mainland or Overseas phrasing in the set up rule.
It is obviously meant to keep things like the WDF in the Middle east where it belongs at start.
Is E. Prussia considered part of Mainland Germany for this rule or does the Polish corridor make it a separate "entity" for setup adjusting?
See page 48 of the rulebook, section 16.0. It lists all countries and which areas are mainland/overseas. East Prussia is indeed mainland so you can swap units freely between EP and Germany proper.
Do keep in mind that Poland does not start the Main Event at war. So the Poles will setup after all the major factions, including Germany. My own Polish defense may change noticeably based on where the German units are at the start.