web.config transforms for <applicationSettings>

Transform file:

<applicationSettings>
   <AppName.My.MySettings>
      <setting xdt:Transform="Replace" xdt:Locator="Match(name)" name="setting1" serializeAs="String">
           <value>New Value</value>
       </setting>
    </AppName.My.MySettings>
  </applicationSettings>

web-config-transform

I know this is a little late, but the following transform file will allow you transform just one setting when you have multiple.

<configuration xmlns:xdt="http://schemas.microsoft.com/XML-Document-Transform">
  <applicationSettings>
    <YourProject.Settings>
      <setting name="Log4NetPath" serializeAs="String" xdt:Transform="Replace" xdt:Locator="Match(name)">
        <value xdt:Transform="Replace">NewPath</value>
      </setting>
    </YourProject.Settings>
  </applicationSettings>
</configuration>