This is going to sound backwards, but if you change the Type attribute to string it'll work. The reason is clear when you look at your MSI's Registry table using ORCA.
When you select integer WiX author's "#[PRESERVEMYSETTING]" and when you select string it author's [PRESERVEMYSETTING]. Since PRESERVEMYSETTING is already #1 you want it to be #1 not ##1.
<Component Id="MySettingKey"
Guid="{76C4B14C-14BC-42E1-91F0-75C9F2A20EC8}">
<RegistryValue Id="MySetting"
Action="write"
Name="MySetting"
Value="[PRESERVEMYSETTING]" <!-- Secure Properties are PUBLIC properties -->
Type="string"
KeyPath="yes"
Key="Software\!(loc.ProductManufacturer)\!(loc.ProductName)"
Root="HKMU"/>
</Component>