Here's the skinny on paying collections:
First, the status of a collection doesn't matter to FICO. Pay it, settle it, flip 'em the bird and don't pay a dime--your score won't change. If you want to help your score, it has to be REMOVED entirely.
Second, the status does matter somewhat to human beings reviewing your credit report. A paid charge-off does look a little better than settled, which in turn is slightly above open and unpaid. I have also heard anecdotal evidence that some automated reviews look at status in addition to score.
Third, trying to DV or PFD a collection within SOL can result in a lawsuit. Doesn't happen often, but be sure you have the money to PIF before tickling that sleeping dragon.