It can be either.  There aren't any hard rules about which to use when, it's really up to personal preference.

Since it is written with Z+U+U in draconic instead of Z+UU, the fact that Bethesda went out of their way to add the apostrophe between the letters, and the fact it is usually pronounced as 2 syllables, I believe the variant with a single syllable is allophonic, so only an occurence in connected informal speech. In formal speech, you would likely keep it as 2 syllables, but there will probably be no confusion if you shorten it to 1 when using informal speech.