Will a creditor agree to update credit report as "Paid" if I opt for settlement?

The creditor will update your credit report as "paid as agreed" or "paid as settled".

You can use a pay for delete settlement letter to remove the information on this particular account from your credit report.
https://community.debtcc.com/credit-repair/pay-for-delete.html

Once the payment is clear, the creditor will update your credit report as "paid as settled".

The credit report will be updated as "Paid" if a person pays back whatever is due. I don't think you can update the status the way you want.

Usually, it will be updated as "Paid as settled" since you haven't paid the entire outstanding balance.

You can offer the lowest settlement amount that you think the creditor would be willing to accept in first chance. As a part of your offer, inform yoour creditor that you want them to report your debt as “paid in full” in your credit report rather than as "paid as settled". That's your only option.