The argument over the US/UK pronunciation of “risotto” stems from how the first “o” is pronounced in Italian.
It is a sound we don't really make in English, lying almost exactly between our short and long “o” sounds. To the US ear, it sounds more like a long “o”; shorter in duration, but essentially the same vowel sound. To the UK ear, it sounds more like a short “o” rhyming with “pot”. For the US speaker the second syllable rhymes with the Italian word for eight, “otto” (oh-toh). For the UK speaker, who's long “o” sound is more flexed and drawn out, this would sound a bit strange (oe-toe)—and no doubt he‘s been told as much—so he rhymes it with "motto" or the name “Otto” to get a bit closer.
The same phenomenon arises around the pronunciation of the Spanish “Rioja”, with the US speaker saying “Ree-ò-ha” (approximating the Mexican Spanish pronunciation of the “j” as an “h”), and the UK speaker saying “Ree-ock-ka” (and doing something strange and interesting with that “j”, turning it into a “k” in an attempt to mimic an aspirated “kh” sound).
Its all a bit baroque (US: rhymes with “joke”; UK: rhymes with “rock”), the native pronunciation lying almost exactly in between the two.
So which pronunciation is standard for the [ʊ] sound? Rounded or unrounded?
Certainly there is some rounding, but because roundedness is not phonemic in this position, there is also considerable variation in how much of it actually occurs in any given word and speaker.
For example, you will find that it is generally somewhat more rounded in pull and full than it is in put and foot respectively. That’s because having an r or an l right next to it rounds it off a bit — which is why it is a bit more rounded in root and rook than it is foot or cook. Same with rookie versus cookie, where the first version is a bit more rounded than the second. And of course, a w helps: compare how wool is even more rounded than full, and also moreso that wood.
I believe English has no words with [ʊw], as that seems redundant. However, it can occur in phrases, especially in some dialects, where something like I knew it full-well may approach that.
However, it is still perceived as the very same phoneme in all those words and cases I’ve just listed above.
Correction — or not
I said that I thought English had no words with [ʊw] in them. And at the end of the day, I still believe that. However, I have discovered that grepping the OED yields the apparent existence-proof counterexample of Rauwiloid, which means:
A proprietary name for a hypotensive preparation containing a number of alkaloids extracted from Rauvolfia serpentina.
You also have compound words whose first element ends in [aʊ] (rather than [aw], as it is sometimes spelled) connecting to something that begins with [w], and which have in effect a “double w” in them, you expand the list to include such things as:
bow-wow, powwow, skeow-ways, wow-wow
Finally, if you consider the sound in words like no and micro to be
an [oʊ] diphthong rather than [ow], then you get all these, most of which were originally compounds of some sort:
froward, frowardly, frowardness, glow-worm, Holloway,
hollowwort, Howeitat, Khowar, meadow-wink, microwave, microweld,
Moldo-Wallachian, nowise, Oldowan, Parowax, powan,
shalloway, slow-worm, swallowwort, werowance,
yellow-wood, yeowoman.
For example, yeowoman theoretically yields /ˈjoʊwʊmən/, at least in North America. Still, there is a reasonably convincing argument to be made that that one is better written as simply /ˈjowʊmən/.
Slightly less uncommon is nowise, which is a compound of one word ending in a diphthong connected to another starting with a triphthong, so /ˈnoʊˌwaɪz/.
But I am still highly dubious of the existence of [ʊw], because I think it fuses into the semi-consonantal glide, [w]. After all, nowise and no eyes are homophonic, so I think this idea of [ʊw] is very hard to justify, and so I stand by my initial statement.
Even towel is usually pronounced with just one syllable, /taʊl/, thereby rhyming with cowl /kaʊl/. Even with folks who work very hard to put two syllables into that, with /ˈtaʊ.wəl/, I submit that you could write that /ˈtawːəl/ and avoid the whole controversy of whether a semi-vowel/semi-consonant/off-glide is really /ʊ/ or really /w/. However you write it, it seems like the same sound to me, such that bisyllabic towel just has a geminate [w]: /ˈtaw.wəl/.
Best Answer
From Kingsley Amis's The King's English. (The section goes on for several pages. Tell me if you want some interesting tidbits or a synopsis of it.)
Also, on the second part of your question, I think you have two competing tendencies. On the one hand, to pronounce things exactly as they are spelled is a kind of pedantry that runs counter to the domestic evolution of language... on the other, to try to pronounce all imported or foreign words (probably most words in the English language) according to the language of their originals is equally pedantic.
Put another way, I think that the kind of people who scold spelling-pronouncers are the same kind to scold or roll their eyes at lingustic pronunciation purists. "It should be this way because it looks like that on paper!" For the most part the same tendency.