Why do many people spell, and pronounce, the name ישראל as Yisroel, as if it had an americanized cholem? Isn't it spelled with a kamatz? Do such people still pronounce it as Yisroel in Shema?
The Ashkenazi pronunciation of Hebrew distinguishes seven different vowels. They can be arranged more or less as follows (first represented in Hebrew orthography under the letter א, then in IPA if you want to find it on this chart):
אִ אֻ i u אֵ אֹ e o אֶ אָ ɛ ɔ אַ a
(Despite the transcription of tzere and cholam as /e/ and /o/ respectively, they are commonly pronounced as diphthongs, varying depending on the dialect. The analysis of seven vowels, rather than five vowels with diphthongs, is for clarity, and to correspond with the Hebrew orthography.)
For comparison, Sefaradim (and modern Israeli speakers) pronounce both Ashkenazi /a/ and /ɔ/ as /a/, and /e/ and /ɛ/ as /e/ (except for kamatz katan, which Ashkenazim pronounce /ɔ/ and Sefaradim pronounce /o/).
The vowel patach (IPA /a/) and the vowel kamatz (/ɔ/) are distinct in this version of Hebrew, and both are distinct from the cholam (/o/). Using the five orthographic vowels a, e, i, o and u inevitably forces anyone transcribing seven different vowels to either use digraphs (e.g. ei, ou), accents (e.g. ê, ô) or simply to leave the distinction between the different sounds ambiguous. The choice of o to transliterate the kamatz is simply the third option. This transliteration obviously doesn't imply they pronounce it the same as the cholam.
Since this is the traditional pronunciation for Ashkenazim, presumably they do their best to preserve it when reciting Shema and other prayers.
It depends on what havarah (pronunciation) you use. Ashkenazim pronounce the vowel kamatz as somewhere between an "o" and "aw", whereas Sephardim pronounce it as "ah". Therefore the Hebrew word ישראל becomes "Yisro'eil" in Ashkenazi and "Yisra'el" in Sephardi. As for Ashkenazim saying "Yisroel", this is because it's difficult to say "Yisro'eil" quickly and therefore it generally becomes slurred until the tzeirei becomes an "eh".