When creating the new column you can use the SQL Server WITH VALUES syntax to have the default value set.
CREATE TABLE TableA
(
ID INT IDENTITY (1,1),
TestData VARCHAR(120)
);
INSERT TableA Select 'A';
INSERT TableA Select 'B';
INSERT TableA Select 'C';
SELECT
*
FROM
TableA;
Running the above produce the following output.
ID TestData
1 A
2 B
3 C
We then add two new columns, Field1 and Field2 using the following syntax
ALTER TABLE TableA ADD [Field1] [xml] DEFAULT
CAST(N'<SettingValues xmlns:xsd="http://www.w3.org/2001/XMLSchema" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xmlns="http://someurl.com/schemas.xsd" />' AS xml)
ALTER TABLE TableA ADD [Field2] [xml] DEFAULT
CAST(N'<SettingValues xmlns:xsd="http://www.w3.org/2001/XMLSchema" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xmlns="http://someurl.com/schemas.xsd" />' AS xml) WITH VALUES
The following desired result is obtained for the new column Field2 with the existing rows populated with the XMLstring while those for new column Field1 are Null.
ID TestData Field1 Field2
1 A NULL <SettingValues xmlns:xsd="http://www.w3.org/2001/XMLSchema" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xmlns="http://someurl.com/schemas.xsd" />
2 B NULL <SettingValues xmlns:xsd="http://www.w3.org/2001/XMLSchema" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xmlns="http://someurl.com/schemas.xsd" />
3 C NULL <SettingValues xmlns:xsd="http://www.w3.org/2001/XMLSchema" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xmlns="http://someurl.com/schemas.xsd" />