Convict protected by disgusting settlement (7)
I believe the answer is:
village
'settlement' is the definition.
('village' can be a synonym of 'settlement')
'convict protected by disgusting' is the wordplay.
'convict' becomes 'lag' (I've seen this before).
'protected by' means one lot of letters goes inside another.
'disgusting' becomes 'vile' (I've seen this before).
'lag' inserted inside 'vile' is 'VILLAGE'.
(Other definitions for village that I've seen before include "Small rural settlement" , "Settlement smaller than a town" , "little community" , "Rural community" , "little place" .)