If you settle, then you wind up unhappy. Settling for whoever means you give up on being happy and run the risk of falling in love with a person that doesn't love you back.
Guess it depends on what you consider settling. I don't settle for anything, if I did I would be a second shift supervisor at UPS and given up programming. If I had settled I'd still be single instead of married.
Though, what you are describing isn't settling, you are describing a person convincing themselves of a lie (which like settling, will just end in misery).