I'm open to correction here but I think its de Danann rather than Dé Danann.
The de means of, whereas Dé means God.

Dé would be pronounced cloce enough to Day whereas de is pronounced deh, pretty close to the way most Dublin people pronouce the. As far as I know they were the followers of the god Danú (whose name is being used now by another excellent young traditional group).
Danann is pronounced Dan-ann (as in the names) with the emphasis on Dan.

You do hear a lot of people pronounce the groups name as Day Dan-ann, but I think this is incorrect. I'm also fairly sure there's only one a in the second syllable.

You're right of course Áine about the three syllables but it can be tricky enough to get the phonetics of this written down, wihtout trying to explain how the inaudible middle syllable sounds. If you were to hear a good native Irish speaker, the inaudible can be heard clearly, if that makes any sense.