Yes, they can. The user defaults are stored relative to your app directory here:
./MyAppName.app
./Library/Preferences/com.mycompany.MyAppName.plist
The plist file is not encrypted or signed, so it can be modified easily:
plutil -convert xml1 com.mycompany.MyAppName.plist
vim com.mycompany.MyAppName.plist
You can look into the iOS keychain, as @rckoenes said, or also something like this open source secure defaults replacement, which offers an interface similar to NSUserDefaults
.
Update:
Since iOS 8, the data directory (and thus the preferences plist files) are now under:
/var/mobile/Containers/Data/Application/<GUID>/Library/Preferences/
Apple Reference Docs