This should work.
We load the new values file, and then we process then xml file by replacing old value with new value using line number as the key.
awk 'FNR==NR{a[FNR]=$0;next}{$NF=gensub(/value=".*"\/>/,"value=\""a[FNR]"\"\/>","g",$NF);print}' file2 file
#OR working with regex groups:
awk 'FNR==NR{a[FNR]=$0;next}{$NF=gensub(/(value=")(.*)(".+)/,"\\1"a[FNR]"\\3","g",$NF);print}' file2 file
Testing:
$ cat file
<word key="ACTIVE" group="Service application" value="testvalue1"/>
<word key="ACTIVE" group="Service application" value="testvalue2"/>
<word key="ACTIVE" group="Service application" value="testvalue3"/>
<word key="ACTIVE" group="Service application" value="testvalue4"/>
<word key="ACTIVE" group="Service application" value=""/>
$ cat file2
newvalue1
newvalue2
newvalue3
newvalue4
newvalue5
$ awk 'FNR==NR{a[FNR]=$0;next}{$NF=gensub(/value=".*"\/>/,"value=\""a[FNR]"\"\/>","g",$NF);print}' file2 file
<word key="ACTIVE" group="Service application" value="newvalue1"/>
<word key="ACTIVE" group="Service application" value="newvalue2"/>
<word key="ACTIVE" group="Service application" value="newvalue3"/>
<word key="ACTIVE" group="Service application" value="newvalue4"/>
<word key="ACTIVE" group="Service application" value="newvalue5"/>