Given :

<?xml version="1.0" encoding="UTF-8" ?>
<FileZilla3>
<Settings>
    <!-- ... -->
    <Setting name="Last local directory" type="string">/tmp</Setting>
    <Setting name="Filelist directory sort" type="number">0</Setting>
    <!-- ... -->
    </Settings>
</FileZilla3>

Let’s use ElementTree that is faster than DOM and more elegant than SAX.

#!/usr/bin/env python
# -*- coding: utf-8
import xml.etree.ElementTree as ElementTree

xmlfile='filezilla.xml'
etree = ElementTree.ElementTree()
with open(xmlfile) as x: etree.parse(x)

for item in etree.findall('/Settings/Setting'):
   if item.attrib['name'] == 'Last local directory':
       item.text='/home/louis/Téléchargements/'.decode('utf-8')

etree.write(xmlfile,encoding="UTF-8")

Result :

<?xml version='1.0' encoding='UTF-8'?>
<FileZilla3>
<Settings>
    <!-- ... -->
    <Setting name="Last local directory" type="string">/home/louis/Téléchargements/</Setting>
    <Setting name="Filelist directory sort" type="number">0</Setting>
    <!-- ... -->
</Settings>
</FileZilla3>

Additional tag : parser