Gojira is a Japanese combination of 'Gorilla' (gorira) and 'Whale' (kujira). Toho didn't just come up with this out of the blue. One of the people who worked at the studio, who was apparently a rather large person had gotten the nickname gojira, and Toho apparently thought it was a good name for their new monster.
The British had a habit of twisting up alot of Native American words when they first settled here in the US. When Americans moved out west, they did the same thing with the Native Americans out there. I guess it makes it easier to say the word, and still keeping it similar to where it originally came from.
It's pronounced "Go-jee-ra", with equal emphasis on each syllable, roll the "ra" a bit, there, you've got it. The name "Godzilla" was thought up by Toho themselves, not any American company... promotional art for "Godzilla" that pre-dates the film's sale to an American distributer was circulated by Toho in the months following the films release in Japan on November 3rd, 1954. The odd translation possibly arises from the practice of writing the romanization of the Japanese katakana character for "ji" as a "dzi" sound, which seemed to be the practice in the 50's.
And if you want to hear the name pronounced correctly without tracking down copies of the films in Japanese, watch the US version of the first film... there's a "press conference" scene where Dr. Yamane (Takashi Shimura) announces an expidtion to Odo Island... or so Raymond Burr's English narration would have you believe (Shimura is not dubbed in this scene, and the Japanese is left intact). Actually, the scene occurs much later in the film in the Japanese version, and Yamane is actually making a plea for Godzilla to be studied, not destroyed. He says the name "Gojira" several times in this scene, which must not have been noticed by the editors of the US version.
Are there any sub-titled versions of the Japanese original release? I always thought the Americanized version was pretty good but I hear tell that it's not as good as the original Japanese version. There's a disquiet to the whole film and the cinematography is lushly ominous. I love it.