I mean no offence qalnor, but the first post does read a little like it was intended to spark ferocious discussion. Then again, you've said quite a few things since then that give the impression you have actually put a deal of thought into the idea, so I'm not sure that claiming the entire post was simply to provoke reaction is entirely accurate.
That having been said, the flaming started because there are a lot of people who feel very strongly on the issue one way or the other. That's cool, too. Unfortunately, a lot of people forget that, as Umberto Eco once said "Just because I *believe* it is so does not make it so". In other words, it's alright to say "I disagree because A B C", but it's not alright to say "You're wrong because everything I believe is right". That's the problem with issues in morality - it tends to be a personal thing that's not really set by any benchmark, at least in semi-controversial issues like this.
Anyway. Back to the actual question at hand.
Prostitution is viable within the Fortress at the moment, although it probably wouldn't be that useful. Economically (and yes, this sounds cold, but there you go) dwarves don't really have the... extra push of having little or no means to support themselves, largely because even once the Bookkeeper arrives the dwarves seem to run under some strange form of socialism (when was the last time you met a socialist who supported the idea of a monarchy?). Socially, the dwarves *seem* to be monogamous. Once a couple are together, that's it. So far, anyway - coding that kind of social dynamic is probably a lot easier than anything else just at the moment. Ideally, then, the nobles would probably be the ones who would, uh, be involved in the issue.
This isn't without precedent in human society, though. Courtesans have been around for a long, long, long time. In a some cases, it's actually been a respected profession - courtesans have been people with quite a lot of political clout. It would be interesting to see a similar system for the Dwarves. Courtesans (male and female, of course) could arrive, attatch themselves to a noble, and then make demands through the noble. A Broker, for example, does not require much in the way of Dwarven comfort. However, if a Broker took up with a courtesan, maybe the courtesan would start demanding much more luxurious items. This could upset the other nobles - "Why's she getting all these fancy things? She's only a Broker, after all!", so you have to tread the thin line between upsetting the Broker and her courtesan and upsetting the higher-ranked nobles.