If $M$ is finitely generated and projective, then $\operatorname{Hom}_R(M,R)$ is also projective. Indeed, if $R^n\to M$ is a finite presentation of $M$, then it splits by projectivity, so we have a direct sum decomposition $R^n\cong M\oplus N$ for some $N$. Applying the functor $\operatorname{Hom}_R(-,R)$ to this, we get a dual direct sum decomposition $R^n\cong \operatorname{Hom}_R(M,R)\oplus \operatorname{Hom}_R(N,R)$ of right $R$-modules. It follows that $\operatorname{Hom}_R(M,R)$ is projective (finite generation is needed here because if $n$ were infinite, the dual of $R^n$ would be an infinite product of copies of $R$, which need not be projective).
In particular, this means $\operatorname{Hom}_R(M,R)$ is flat, so the functor $C(N)=\operatorname{Hom}_R(M,R)\otimes_R N$ is exact. Since $M$ is projective, the functor $D(N)=\operatorname{Hom}_R(M,N)$ is also exact. You have described a natural transformation $a:C\to D$. It is straightforward to check that $a_N:C(N)\to D(N)$ is an isomorphism if $N$ is free. Now for general $N$, choose a presentation $F_1\to F_0\to N\to 0$, where $F_1$ and $F_0$ are free. Consider the diagram
$$\require{AMScd}
\begin{CD}
C(F_1) @>>> C(F_0) @>>> C(N) @>>> 0\\
@VV{a_{F_1}}V @VV{a_{F_0}}V @VV{a_N}V \\
D(F_1) @>>> D(F_0) @>>> D(N) @>>> 0
\end{CD}$$
Since $C$ and $D$ are exact functors, the rows of this diagram are exact. Since $a_{F_1}$ and $a_{F_0}$ are isomorphisms, $a_N$ is an isomorphism by the five lemma.
More generally, this argument shows that if a natural transformation between right exact functors is an isomorphism on free modules, it is an isomorphism on all modules.