To overcome this problem I slightly changed the approach, in particular I'm declaring xml namespaces in xml-dml modify function itself, and adding namespace prefixes to the inserting nodes. That did the trick
UPDATE XmlTable
SET ConfigXml.modify('
declare namespace ns="http://quartznet.sourceforge.net/JobSchedulingData";
insert <ns:job>
<ns:job-detail>
<ns:name>jobName</ns:name>
</ns:job-detail>
</ns:job>
as last into (/ns:quartz)[1]')
WHERE ConfigXml.exist(N'
declare namespace ns="http://quartznet.sourceforge.net/JobSchedulingData";
//ns:quartz/ns:job/ns:job-detail/ns:name[.="jobName"]') = 0
Hope this helps someone else.