She was a prostitute? I guess that I can see that, but having viewed the film twice in the theater, I never quite picked up on that point exactly. Obviously, she constituted an escort of some kind, so
The casting represented the imperative of casting stars. In those days, when the "old Hollywood" remained more or less intact (prior to its dissolution later in the sixties), filmmakers valued naturalism less, yet matters have not totally changed. Was Anne Hathaway convincing as a brainy astronaut in
Interstellar
(Christopher Nolan, 2014)? The filmmakers cast her because she was a star, and stars sell tickets, the same then as now. The strategy represents a producer's or studio's approach to filmmaking, more or less, although some directors buy into it.
Actually, one can see a discussion of this topic in this interview with Clint Eastwood from 1974, specifically during the 18:40-20:15 passage and the 21:20-21:50 passage:
https://www.youtube.com/watch?v=SNe17nwn0G4&t=1173s
As for Hepburn, her casting is certainly problematic. She is playing a character who is supposed to be, what, nineteen? And Hepburn was about thirty-one during the filming. Moreover, her character is supposed to be an ingenue, whereas Hepburn was worldly and sophisticated. No, matters do not entirely mesh.
But in other ways, her casting works. Hepburn fit the part of a waif physically, in terms of her body type, and she projected a sense of quirkiness and barely suppressed desperation that also fit the role. Additionally, her combination of irreverence and vulnerability matched the character.
Certainly, her casting is imperfect, but I feel that it works better than Marilyn Monroethe preference of author Truman Capotewould have worked. Monroe could certainly play melancholy and depressive anxiety, as she proved in
The Misfits
from that same year, but she she was even older (by three years) than Hepburn, and her voluptuous figure would not have fit the part of a waif.
The most anachronistic casting choice is certainly Mickey Rooney as the Japanese neighbor. Beyond the obvious and unfortunate ethnic caricature, Hollywood in that era often dispensed with ethnic realism in its casting choices. A striking example is
Apache
(Robert Aldrich, 1954), where Burt Lancaster plays Geronimo. Given that Lancaster is obviously a white guy being made to seem like an Indian, the casting just does not work in my opinion. If anything, the casting of Rooney in
Breakfast at Tiffany's
is less of an issue because his part is smaller and the film constitutes a romantic comedy, a genre where realism is less important.