http://www.youtube.com/watch?v=mMFdeYwPEQQ
The above link leads to an old commercial for Super Mario 2 on NES. Notice how the announcer pronounces Mario, "Super Mary O."
I've come to realize that this is a dialect thing... depending on where you are from in the country, you'll pronounce it differently.
Growing up in Texas, I was always confused when my cousins from New York would call Mario, Mary-o. I even found it funny. I remember visiting them in 1990. When I came back home from New York, I had adopted their way of saying Mario. The kids at school thought I was crazy. I would say, "Yeah, I can't wait to go home and play Super Mary-o Bros." They would look at me like I was insane.
How do you pronounce the famous plumbers name? Sadly enough, this is something I've been pondering for YEARS.