I was one of the few who didn't. In fact, I would say John Cale's version in Shrek was more distracting, considering the sexual themes of the song and the movie it was playing in. Then again, Shrek was full of adult moments, and Hallejuah was probably just another thing for the parents to enjoy.
But as always, we like to take such mildly combative subjects and put them up for discussion here. Surely there's a ton of moments in movie music history that yanked you right out of the film and left you giggling, wincing, or rolling your eyes.
On the goofy end of the scale, I would offer Top Gun, with Kenny Loggins' Playing with the Boys as a bunch of shirtless hunks play volleyball, or any of the power ballads in Rocky IV. (Still, freedom was against the ropes in that movie. Maybe I'm being too harsh.)
On the "ok, but too obvious" scale is the use of U2's Pride (In the Name of Love) in Elizabethtown. Normally, Cameron Crowe's music is impeccable, but playing it while Orlando Bloom is standing outside of where Martin Luther King was assassinated? Yeah. Not good. There's tons of moments like these. Let's write the definitive list here.
(And in order to give credit where it's due -- this idea was partly inspired by a discussion I had on the /filmcast last week ... which was partly inspired by our Good Music from Mediocre Movies debate here on Cinematical. It's like a sweater that keeps on knitting and knitting.)