To create a new default and also seed with the WITH VALUES clause only works when adding a new column, not when changing an existing column.
What you need to do is three things.
Add the default
Update the column to the default value where it is null.
Alter the column to not null
The first two steps can be done in any order.
ALTER TABLE DATA
add constraint DF_IsTested DEFAULT(0) FOR IsTested
GO
UPDATE DATA
SET IsTested = 0
WHERE IsTested IS NULL
GO
ALTER TABLE DATA
ALTER COLUMN [IsTested] [bit] NOT NULL
GO
/Kenneth