The Θ sound in Greek is certainly a remain of the pre-Greek languages.

As far as I know the sound is IE and in many cases can be discussed together with Φ and Χ. Initially they were aspirated consonants, later (but in Antiquity, nevertheless) they became fricatives. But apparently the proto-Greek language did not have consonant clusters like ΝΘ (as in Korinthos, Erymanthos, etc.), and perhaps there are other contexts for Θ which can indicate a substratum.

 

What troubles me is that Θ appears in Thracian writting but, from my understanding Thracians pronounced it a Z not Θ like english "Thermal" or Spannish Zaragosa.

The pronounciation of this sound in Thracian is uncertain. Some scholars considered it a fricative, others a palatal sound (the two are not mutually exclusive, though). The difference between Thracian and Greek is that in writing Thracian glosses and names the sounds Φ and Χ are virtually absent (present in a very small number), and thus they are usually regarded as corruptions or adaptations to some other language's phonology (Latin, Greek, etc.). At the same time, in Thrace (but not only), the Greek aspirates were often de-aspirated (one of the most famous examples is Pulpudeva, the Thracian name of Philippopolis, today Plovdiv in Bulgaria)

 

 

 

As for the Thracian pronounciation i'm certain I've seen the word "Thracians" (Θράκες) written as Zracians (Zράκες) and the word Thrace (Θράκη) written as Zraece (Ζραίκη). That's why i suspect that Θ in Thracian speech might have been actually read as Z. 

http://epigraphy.packhum.org/inscriptions/oi?ikey=170343&bookid=139&region=5&subregion=12 - http://epigraphy.packhum.org/inscriptions/oi?ikey=170343&bookid=139&region=5&subregion=12

 

but here's not about Thrace, but about of the many strategies of Thrace. I'll give you however that Zraike and Thrace might have a common etymon, and that ζ/θ to be a meaningful evidence for our case, however before supposing what was the Thracian sound behind that Θ let's review some more evidence:

 

1) in this inscription there's another strategy called Αθιουτικη. In another inscription ( http://epigraphy.packhum.org/inscriptions/oi?ikey=169195&bookid=187&region=5&subregion=12 - http://epigraphy.packhum.org/inscriptions/oi?ikey=169195&bookid=187&region=5&subregion=12  ) we find the strategy Ασουτικη, which probably is the same one. The alternance is θι/σ

2) http://epigraphy.packhum.org/inscriptions/oi?ikey=170802&bookid=140&region=5&subregion=12 - http://epigraphy.packhum.org/inscriptions/oi?ikey=170802&bookid=140&region=5&subregion=12  Θιντας but in Dacia in an inscription there are names like Tzinta or Tzinto http://books.google.com/books?id=kn4BAAAAQAAJ&pg=PA225 - http://books.google.com/books?id=kn4BAAAAQAAJ&pg=PA225  . The alternance is θ/tz

3) In a series of inscriptions we find several occurences of another name:

http://epigraphy.packhum.org/inscriptions/oi?ikey=169912&bookid=188&region=5&subregion=12 - http://epigraphy.packhum.org/inscriptions/oi?ikey=169912&bookid=188&region=5&subregion=12  - Γεικεθιηνος

http://epigraphy.packhum.org/inscriptions/oi?ikey=169909&bookid=188&region=5&subregion=12 - http://epigraphy.packhum.org/inscriptions/oi?ikey=169909&bookid=188&region=5&subregion=12  - Γεικεσηνος

http://epigraphy.packhum.org/inscriptions/oi?ikey=169910&bookid=188&region=5&subregion=12 - http://epigraphy.packhum.org/inscriptions/oi?ikey=169910&bookid=188&region=5&subregion=12  - Γεικεσηνος

http://epigraphy.packhum.org/inscriptions/oi? - http://epigraphy.packhum.org/inscriptions/oi?

The alternance is θι/σ

4) Many inscriptions (I won't list them all) give a Thracian epithet of Zeus:

http://epigraphy.packhum.org/inscriptions/oi?ikey=170317&bookid=139&region=5&subregion=12 - http://epigraphy.packhum.org/inscriptions/oi?ikey=170317&bookid=139&region=5&subregion=12  - Ζβελσουρδος

http://epigraphy.packhum.org/inscriptions/oi?ikey=168823&bookid=186&region=5&subregion=12 - http://epigraphy.packhum.org/inscriptions/oi?ikey=168823&bookid=186&region=5&subregion=12  - Ζβελθιουρδος

http://epigraphy.packhum.org/inscriptions/oi?ikey=175212&bookid=206&region=14&subregion=49 - http://epigraphy.packhum.org/inscriptions/oi?ikey=175212&bookid=206&region=14&subregion=49  - Zbelsurdus

The alternance is θι/σ

5) The name of a Thracian tribe (and its territory/strategy):

http://epigraphy.packhum.org/inscriptions/oi?ikey=174817&bookid=204&region=14&subregion=49 - http://epigraphy.packhum.org/inscriptions/oi?ikey=174817&bookid=204&region=14&subregion=49  - Δενθελητικη

http://www.thelatinlibrary.com/pliny.nh4.html - http://www.thelatinlibrary.com/pliny.nh4.html  - Denseletae

http://www.intratext.com/IXT/LAT0137/_PY.HTM - http://www.intratext.com/IXT/LAT0137/_PY.HTM  - Denseleti

http://books.google.com/books?id=2DEBAAAAMAAJ&pg=PA74 - http://books.google.com/books?id=2DEBAAAAMAAJ&pg=PA74  - Δενθεληται?

The alternance is θ/s

 

Since θ seems to know also z-based alternances but also s-based, I think it's not far-fetched to assume we are dealing here with a pair of sounds, a voiced and a voiceless one. The sound could be something like the first sounds in the English words champ and jump, or maybe as you suggested the sounds to be something like ts and dz. Or worse, there were perhaps several prounciations in different dialects, probably themselves responsible for the alternances or lack of we find in the written material.

 

What is even more interesting is that with this consideration some Thracian ath- toponyms can be now understood as coming from PIE *ak (meaning 'sharp': http://www.bartleby.com/61/roots/IE8.html - http://www.bartleby.com/61/roots/IE8.html  ), and could refer to some rugged terrain (mountains). Therefore it can be that even mount Athos' name is the Hellenization of a Thracian toponym.