Do tokens work with Rules "Set a data value"?
I have found the answer to my own question and thought I'd share. The solution is to use Token Filter module. Once you have installed this module got to: Admin > Config > Content Authoring > Text Formats. Create a new Text Format or edit an existing one and you will see an option called "Replace Tokens", check this and save your format. Now when your are using "Set Data Value" make sure that the text field has the input format that you just created/changed.

You should now be able to pass tokens successfully using Rules Set Data Value and they will format correctly.