Thank you for your blog post on medium. It helped me a lot.
I found out how to make the generation of the maven settings.xml work with setup-java for me:
For me the problem was that i first declared the setup-java action and then the actions/cache. Since actions/cache caches the m2 folder where the settings.xml is added to, the settings xml was removed again since i first had the cache working and later added the whole release stuff.
Not sure if it is the same problem for you though