i've given the barbs settlers and gotten mixed results. they can and will settle, but they also will stack 15 settlers in a city for 1000 years for no reason too. if you edit the civilizationinfo.xml you can let the barbarians build settlers. or anything else for that matter. i've had the barbarians beat me to the great lighthouse, then later that game they beat me to notre dame on the same turn that they got a great engineer and stole the spiral minaret out from under me.