$variables['myvariable2'] = "My settings are: .'$variables['myvariable1']'";
You aren't simply retrieving the value, but making it part of another string value. In this case you are probably better off using string concatenation (. period). Which you seem to be trying to use above, but in the wrong place...
$variables['myvariable2'] = "My settings are: '" . $variables['myvariable1'] . "'";
(I've purposefully spaced out the string concatenation operator (period) in the code above for clarity, however, I tend not to do this normally.)
Or, if you want to use "variable parsing" then...
$variables['myvariable2'] = "My settings are: '$variables[myvariable1]'";
(Note I have removed the single quotes around the array index in the above example.)
Or, preferably, use "complex" curly brace syntax (also "variable parsing"):
$variables['myvariable2'] = "My settings are: '{$variables['myvariable1']}'";
(Note that variable parsing only works in double quoted strings, and HEREDOC/NOWDOC syntax.)