For updating, you can use the script contained in your Xonotic folder under misc/tools/rsync-updater. There should be an update script for every operating system Xonotic runs on. If you're running 0.6 and want to update to 0.7, use the "update-to-release" script, if you want to get the latest bleeding edge nightly build, then use the "update-to-autobuild" script. Note that the nightly builds may be not as stable as the official release, though I had only one or two freezes/startup failures so far if I recall correctly.
The settings and other user data are being stored in a separate folder, depending on your operating system this can be ".xonotic" in your home directory (linux), something like "My Games/Xonotic" (Windows, I'm not sure about that one though), or "Library/Application Support/Xonotic" in your home directory (MacOS).