Yes you can install a newer version over an older one. If the installer tells you to close Explorer.exe, Internet Explorer and other programs, let it close and continue. If in a rare event, it's unable to close Explorer.exe, then you may need to terminate it from Task Manager and then let the installer continue to avoid restarting Windows.
The settings can also be imported but note that new settings introduced in newer versions will remain at their default. So after importing, optionally configure any new settings (it's not required though) and update the XML.