Everyone I know pronounces it as one word FAL.
This stems from the rule of pronouncing Initialism and Acronyms. Initialism does not form a standard word and are therefore pronounced as each individual letter. Acronyms form words which can be pronouned.
Examples of Initiliasm: IBM, SBC, UBS, HTML
Examples of Acronyms: SCUBA, RADAR, LASER, NATO
Fabrique Nationale Fusil Automatique Leger is often written as:
F.N. Fusil Automatique Leger
F.N. FAL
It would than be deducted that the original intent to pronounce FAL as an acronym versus as an initialism.
Of note is the modern derivatives of Fusil Automatique Leger which was so ubiquitous with the F.N. model that the term Fusil d'assaut is often used. The German word Sturmgewehr remainged unchanged from the original STG series of rifles and was used to denote the Sturmgewehr 58. The term FAL itself was probably not meant to denote the actual rifle but only it's description. The 50.00 and other model numbers (STG58, C2, L1A1, G1) were meant closer to the actual name of the rifle. Any medium sized assault rifle could reasonably be called an FAL. But of course we all know FAL can only mean one thing now!