You can store an XML document's string representation in a setting of type String. To save the document, load it into an XmlDocument and set the setting to the value of the XmlDocument.OuterXml property. To retrieve it, create a new XmlDocument and use its LoadXml method to parse the string into an XML document.
This is usually a bad idea. Not because there's anything intrinsically wrong with storing an XML document as text within another XML document -- there isn't. But most settings that you access through the UserSettings property are single values. You're introducing a mode of operation where a single setting can now contain an arbitrary number of actual settings. That's not what most people who read your code are going to expect.
As with a lot of things that give code a bad smell, this may be perfectly fine in your specific implementation. I can imagine circumstances in which I'd do it. But in most cases, I wouldn't.