How do I use dynamic variables for plugin settings?
First - you don't need a template file. You can type the template right into the settings textarea like you already had, and like the other email twig templates do it. Then, in your service, you do:

$email-&gt;body = craft()-&gt;templates-&gt;renderString($settings-&gt;welcomeEmailMessage, ['firstName'=&gt;$firstName]);


The settings textarea then need to have something like:

Hello {{firstName}}, welcome!


And then you should be all set!