I really think the artwork looks great but while thinking about it I really didn't think of a settler unit as a guy (or a group of 4 or 6 or whatever) guys on the world/tactical map.
While I'm sure ampoliros was kidding, a large covered wagon that fills the whole tile filled with supplies, people, etc. actually seems more appropriate. Maybe that's just me and probably a result of them being covered wagons in MoM. I never really found that as being odd of funny.
Also, right or wrong, I don't really think of settlers as combat units like the other units you make. I think of them more like workers and settlers in civ when they pretty much automatically lose in combat. I realize that Civ doesn't have tactical combat and I'm not saying that a settler unit that's alone shouldn't go into the tactical combat screen but I really don't see them as having weapons at all. In terms of D20 I think of them as the NPC "commoner" class with only d4 hit die, no armor or shield proficiency, and only a single "simple" weapon proficiency. An axe, even a handaxe is a "martial" weapon so using axes would result in them being penalized for using a weapon they aren't proficient in (strictly speaking in D20 terms, not that we are in any way required to use such a strict interpretation). A quarterstaff is "simple" weapon at least as is a club (which any improvised weapon is treated as in D20). If it has to be a guy (or set of guys) the I think I prefer the quarterstaff and backpack idea jshores suggested but again I really do think a large covered wagon type unit would be the best.
This really has nothing to do with the art quality though. Again I think the art is visually fantastic it's just my personal opinion of what a setter conceptually is or isn't.