Settings are disappearing in 1.2.4 and below, but you are not correct in one detail.
They are overwritten back to defaults when you activate the plugin.
I suppose, your workflow to update the plugin is as follows:
- Deactivate the plugin
- Click the update link and update it
- activate the plugin <- this step breaks saved settings
You actually do NOT need to deactivate the plugin while you are upgrading it. It’s totally ok and won’t break anything if you just click the upgrade button for an active plugin.
This issue is fixed in 1.2.5 that will be released today. After that reactivating the plugin won’t remove your settings.