How to reference ItemGroup Identity within the definition of the var - msbuild

Question

I have a target like below. It needs to replace content of a file with new content. I have multiple files I am matching with ItemGroup.
I couldn't figure out a way to get this working.
Here is my target definition.
<ItemGroup>
<PRSetting Include="$(settings_root)\**\settings_config_*.xml">
<NewContent>$([System.IO.File]::ReadAllText('%(Identity)')).Replace('[config.version]', '$(PR_Version)'))</NewContent>
</PRSetting>
</ItemGroup>
<Target Name="PrepSettings" Inputs="#(PRSetting)"
Outputs="#(PRSetting->'$out\$Filename.xml')" >
<Message Text="%(PRSetting.Identity) new contents:" />
<Message Text="%(PRSetting.NewContent)"/>
</Target>
I hope I explained it right what I am trying to do. When the target is built, I am getting an error that the path to File::ReadFile() can't be empty string. I am using VS 2019. This is work in progress. I am yet to figure out how to save the new content in destination file.
Update
I have the Itemgroup outside. I updated the question. The reason it is outside is because the target inputs parameter needs it.

Answer 1

Try the following and see if it works:
<Target Name="PrepSettings">
<ItemGroup>
<PRSetting Include="$(settings_root)\**\settings_config_*.xml" />
<PRSetting>
<NewContent Condition="%(Identity) != ''">$([System.IO.File]::ReadAllText('%(Identity)')).Replace('[config.version]', '$(PR_Version)'))</NewContent>
</PRSetting>
</ItemGroup>
<Message Text="#(PRSetting.Identity) new contents:" />
<Message Text="%(PRSetting.NewContent)"/>
</Target>
There are two changes:
There seems to be an issue with an Include that doesn't use an existing ItemGroup and metadata that is self-referencing. So, setting up PRSetting is split in two.
First, establish PRSetting with the Include.
Second, revisit to add the NewContent metadata item.
Add Condition="%(Identity) != ''" on the NewContent metadata.
I'm not able to fully test your exact scenario at present but I tested an analogue.
Here is my test analogue:
<Target Name="PrepSettings">
<ItemGroup>
<PRSetting Include="1;4;2;3"/>
<PRSetting>
<NewContent Condition="%(Identity) != ''">$([MSBuild]::Add('%(Identity)', '1'))</NewContent>
</PRSetting>
</ItemGroup>
<Message Text="PRSetting is #(PRSetting->'(%(Identity),%(NewContent))');" />
</Target>
The output is
PrepSettings:
PRSetting is (1,2);(4,5);(2,3);(3,4);
Regarding your code change to move the ItemGroup outside the target:
The technique of splitting the ItemGroup as written won't work, but if you are using VS2017 or later and working with .NET Core/.NET 5+ you can use Update.
As shown in the question, the Outputs attribute has syntax errors. I assume Outputs="#(PRSetting->'$(OutputPath)\%(Filename).xml')" (or something close) is intended.
As shown in the question, the Outputs attribute will never be satisfied because PrepSettings doesn't create the files. I assume PrepSettings as shown is not complete.