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Well...it's been months since you've asked, so I don't know if this'll even help you now. i don't know where the peeping hole is. But the river is the river in palm brinks. Just go onto the drawbridge and look over the side.

It's not a peeping hole. It's a Peeping Pole and it's actually a spy glass /Looking glass you see in pirate movies. (looks like a telescope that collapse's into it's self )you'll find it in balance valley's future (Starlight Temple) if you go there after you cure Lin a cut scene will put you right in front of the store. When you enter , there is a book shelf and 3 display cases to the left side of the store there are 2 peeping poles in the long display case , remember to get your other pictures ( cresent-shaped light ,starglass,peeping pole ) go to the counter and purchase your starglass. You probally found this long ago,i'm new to this site, I't may be late for you but it may help someone else.