Here's an idea for a proof that doesn't involve Yoneda:
To show $(\varinjlim M_n) \otimes N \cong \varinjlim(M_n \otimes N)$ it is enough to verify that $(\varinjlim M_n) \otimes N $ satisfies the universal property of $\varinjlim(M_n \otimes N)$. This means that if $(M_n, f_{nm})$ is the direct system with limit $(\varinjlim M_n, f_n)$ and $(Y, g_n)$ is any $R$-module such that $g_n = g_m \circ (f_{nm} \otimes id_N)$ for all $n \geq m$ then there exists a unique homomorphism $\alpha : (\varinjlim M_n) \otimes N \to Y$ such that the following diagram commutes (diagonal arrows omitted):
$$\begin{matrix}
(\varinjlim M_n) \otimes N & \xrightarrow{\alpha} & Y \\
\left\uparrow{f_n \otimes id_N}\vphantom{\int}\right. & & \left\uparrow{g_m}\vphantom{\int}\right.\\
M_n \otimes N& \xrightarrow{f_{nm} \otimes id_N} & M_m \otimes N
\end{matrix}$$
Define $\alpha$ as follows: for $m \otimes n \in (\varinjlim M_n) \otimes N $ there exist $k$ and $m_k \in M_k$ such that $f_k(m_k) = m$. Set $\alpha (m \otimes n) = g_k (m_k \otimes n)$. We need to show that $\alpha$ is well-defined, an $R$-module homomorphism, makes the diagram commute and is unique.
(i) $\alpha$ is well-defined: Let $k,j$ be such that $f_k \otimes id_N (m_k \otimes n) = m \otimes n = f_j \otimes id_N (m_j \otimes n)$.
We want to show that $g_k (m_k \otimes n) = g_j (m_j \otimes n)$. Since we have $f_k (m_k) \otimes n = m \otimes n = f_j (m_j ) \otimes n $ we have $f_k (m_k) = f_j (m_j)$. This means that $m_k$ and $m_j$ map to the same thing in $\varinjlim M_n$ hence by the properties of $\varinjlim M_n$ there exists an $l \geq j,k$ such that $f_{kl}(m_k) = f_{jl}(m_j)$. For the morphisms of $Y$ we have that $g_i = g_j \circ (f_{ij} \otimes id_N)$ where $i \leq j$ hence (as pointed out by t.b. in the comments):
$$\begin{align}
g_k (m_k \otimes n) &= g_l \circ (f_{kl} \otimes id_N) (m_k \otimes n) \\
&= g_l (f_{kl} (m_k) \otimes n) \\
&= g_l (f_{jl} (m_j) \otimes n) \\
&= g_l \circ (f_{jl} \otimes id_N) (m_j \otimes n) \\
&= g_j (m_j \otimes n)
\end{align}$$
(ii) $\alpha$ is an $R$-module homomorphism, that is, $\alpha (m \otimes n + m^\prime \otimes n^\prime) = \alpha (m \otimes n) + \alpha (m^\prime \otimes n^\prime)$:
For $m \otimes n, m^\prime \otimes n^\prime \in (\varinjlim M_n) \otimes N$ there exist $j,k$ such that $m \otimes n = f_{k}(m_k) \otimes n$ and $f_{j} (m_j) \otimes n^\prime$ so that $\alpha (m \otimes n) = g_k (m_k \otimes n)$ and $\alpha (m^\prime \otimes n^\prime) = g_j(m_j \otimes n^\prime) $. Then for all $l \geq k,j$: $g_j(m_j \otimes n^\prime) = g_l (f_{jl}(m_j) \otimes n^\prime)$, similarly for $k$ and hence
$$ \alpha (m \otimes n) + \alpha (m^\prime \otimes n^\prime) = g_k(m_k \otimes n) + g_j(m_j \otimes n^\prime) = g_l (f_{kl}(m_k) \otimes n) + g_l (f_{jl}(m_j) \otimes n^\prime) = g_l(f_{kl}(m_k) \otimes n + f_{jl}(m_j) \otimes n^\prime)$$
On the other hand, for $m \otimes n + m^\prime \otimes n^\prime$ there exists $i$ such that $m \otimes n + m^\prime \otimes n^\prime = f_i(m_i) \otimes n+ f_i(m_i^\prime) \otimes n^\prime$ and hence $\alpha (m \otimes n + m^\prime \otimes n^\prime) = g_i (m_i \otimes n + m_i^\prime \otimes n^\prime) = g_i (m_i \otimes n) + g_i (m_i^\prime \otimes n^\prime) = \alpha (m \otimes n) + \alpha (m^\prime \otimes n^\prime)$.
Alternative proof:
It's easier to show it like this: exploit the UP of $\varinjlim(M_n \otimes N)$ to get a unique $R$-module homomorphism $\alpha$ and then show that $\alpha$ is an isomorphism. To this end, consider the following diagram:
$$\begin{matrix}
\varinjlim (M_n \otimes N) & \xrightarrow{\alpha} & (\varinjlim M_n ) \otimes N \\
\left\uparrow{f_n \otimes id_N}\vphantom{\int}\right. & & \left\uparrow{f_m \otimes id_N}\vphantom{\int}\right.\\
M_n \otimes N& \xrightarrow{f_{nm} \otimes id_N} & M_m \otimes N
\end{matrix}$$
Since the diagram commutes it immediately follows that $\alpha$ is the map $m \otimes n \mapsto m \otimes n$ which is an isomorphism.
$$\begin{align} \hom(L\varinjlim M_i, P) & = \hom(\varinjlim M_i, R P) \ & = \varprojlim\hom(M_i,RP) \ & = \varprojlim\hom(LM_i,P) \ & = \hom(\varinjlim LM_i, P)\end{align}$$ requiring one commutation less (and only in the first variable of $\hom$). This doesn't detract from your nice answer!
– t.b. Aug 07 '12 at 15:39