It should be noted from the outset that romanization is not a 
facet of Japanese culture. There is no tradition in Japan that 
states that things must be romanized a certain way; how could 
there be? Romanization is western culture attempting to 
render the Japanese language into it's own written alphabet. It 
also follows that there is no "traditionally correct" version of 
spelling.

Well, not really. Everyone in Japan knows romaji, and everyone learns it 
in school. Besides that, the oo vs. ou issue *exists in Japanese*. That's 
right, in hiragana, they sometimes use the hiragana characters for 'ou' 
and sometimes they use the hiragana characters for 'oo'. (Japanese has 
two 'traditional' phonetic alphabets, plus romaji (romanization), plus 
'Chinese' characters.)

My Japanese teacher (who brought up the issue without being asked by the 
class) noted that the word for 'ice' is always spelled /koori/ and the 
word for 'wolf' is always spelled /ookami/ when spelled in hiragana (when 
teaching children in Japan, for instance). However, most words use the 
characters for /ou/. 

She didn't bring up the issue of spelling in romaji, but it's interesting 
that the accepted romanizations for /koori/ in the textbook are:

kouri        ko(macron)ri        koori

...depending on the system. So it seems to me that there are traditional 
spellings for words, but romanization systems ignore them. I like 'mix 
and match' though. It's more interesting. Henceforth I will use 'Tokyo', 
'imouto' (little sister), and 'koori', whether in romanization or 
hiragana. :-)