O and U are phonetically pretty similar. Especially in diphthongs, some vowels do not express their "full capacity". In this case, the U sound and the A sound are produced very differently with the tongue (closed (tongue almost touches the palate) vs. open). The o sound, however, is half-closed.
They say туалет but i agree they pronounce a so short у that it sounds like тоалет. An underpronounced у gives an о. Anyway, the word comes originally from french. They imitate the way french people pronounce it (that s why it is not тойлет). But now with the influence of the english, they also tend to pronounce it in an english way because lot of people think it comes from english.