Try whether using an XmlTextReader with Normalization set to false helps:
XmlTextReader reader = new XmlTextReader(@"c:\work\test.xml");
reader.Normalization = false;
Settings = (SettingsClass)Serializer.Deserialize(reader);
An XML parser is supposed to normalize crlf to lf, see
#sec-line-ends, so you have to explicitly turn
that off if you don't want it.
Martin Honnen --- MVP XML