Since there is an XML namespace in the XML document ( xmlns:dev="http://www.w3.org/2001/XMLSchema" ), you must add this to your UPDATE !
Try the following:
;WITH XMLNAMESPACES(DEFAULT 'http://www.w3.org/2001/XMLSchema') UPDATE XmlTable SET XmlDocument.modify('replace value of (/Doc/@Settings)[1] with "NewTest"') WHERE XmlId = 1
marc_s
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