http://www.ou.org/torah/tt/5766/miketz66/specialfeatures.htm
Rambam (Sh'vuos 12:9) rules that one who uses Hashem's Name in a
meaningless oath or a an unwarranted blessing violates the Torah
prohibition to use His Name in vain. One who utters His Name without a
purpose transgresses the lower level, Torah commandment to fear His
Name (ibid.:11).In the latter case, the Rambam instructs one to
rectify an improper utterance of the Name by adding words of praise of
Hashem.
As the aforementioned Rambam hinted, it is likewise permissible to use
Hashem's Name to praise Him, including in Shabbat zemiros and other
liturgy. Indeed, some (incl. Rav Sh. Z. Orbach) pronounce the Names
normally. (The rhyming in some zemirot indicates that the liturgist
also did so.) However, many have the custom to alter the Names (Nefesh
HaRav, pg. 160 reports that Rav Soloveitchik did not utter the Names
in zemirot). The explanation of this custom is apparently that we are
concerned that we will not be in the proper frame of mind (B'tzel
Hachuchma IV, 52) or may stop in the middle of a phrase (see Igrot
Moshe, ibid.) or otherwise disgrace the Name. [Ed. or overly repeat
phrases in singing the Z'mirot.]
In practice, one can choose either to pronounce normally or change
Hashem's Names when reading Torah texts, saying informal prayers, or
singing zemirot. When studying b'rachot, he must change the Names;
when reading a whole pasuk, it is proper to pronounce the Names
accurately.