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I want to evaluate a workflow rule based on a custom setting value. The custom setting can be null so I want to check for isNULL before fetching the value of the custom settings field.

This is the formula I'm using

 AND(ISPICKVAL(Rating, "Closed Won"),
 ISNULL($Setup.MySettings__c.notify__c))

This, however, returns a syntax error - "Error: Incorrect argument type for function 'ISNULL()'."

Is there any other way to check for Blank or null values for custom settings?

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The problem isn't ISNULL (though ISBLANK is the recommendation for new fields), it's that checkbox fields won't ever return null. If the custom setting is null, any checkboxes on it will appear as a "false" value instead. As far as I can tell, there's no way to detect the difference between an unset checkbox and a set, but unchecked, checkbox.

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Did you try this -

AND(ISPICKVAL(Rating, "Closed Won"), $Setup.MySettings__c.notify__c)
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    Where Notify__c is a Boolean, there's no need to wrap it in an IF() to return true or false. Boolean fields will never be null. – David Reed♦ Sep 11 '18 at 12:47

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