I covered this not too long ago, but it might have been before you joined in this fray. I pronounce it the first way. Some of the people I know say it the second way. It doesn't bother me too much as long as they get the spelling right :-)
Actually, that should be "Ich bin nicht (ein) Deutscher", just like "Ich bin {nicht} ein Berliner". When a sentence starts with nicht, it's generally imperative, as in "Nicht rauchen!" (no smoking).