Er...um, nope. His Holiness did not just approve of prostitution.
But here's the thing: one could just as easily twist his remarks into approval of prostitution as approval of condom use during prostitution.
For a sane, rational look at what the Pope really said, go here for starters--though there are lots of others; I just don't have time this busy Sunday to gather them all.
But here's an analogy that makes sense to me: suppose that a drug dealer started worrying about all the people who were going to get AIDS by sharing needles in order to use the heroin he was selling, and then suppose that he decided to reduce that risk by handing out free clean needles to his customers. Could that be the beginnings of morality in a person who deals in grave sin, misery and death, and who is steeped in grave sins that place a huge barrier between himself and any kind of good relationship with the Lord Jesus which might possibly lead him to repent of his sins and seek eternal salvation? Sure, and the pope might even say so. But if the pope said so, would that mean that the pope was suddenly in favor of supplying drug dealers with clean needles in the fight against AIDS? Um, definitely not.
A homosexual prostitute is in the same position; his very acts and way of life are like a spiritual prophylactic placing an insurmountable barrier between him and a salvific relationship with Jesus. If, for one second, he starts to care about the physical life and health of the person who is also gravely sinning (perhaps even more so by taking advantage of the prostitute's desperation and vulnerability) by paying him to perform acts of sodomy and other sexual perversions upon him, this might be a door through which a return to morality and virtue might seep in.
But it's not the same thing as saying "Go ahead and hand out free condoms to fight AIDS!" If the individual makes this choice under some circumstances, he may be just barely beginning to recognize the filth and degradation of his way of life--and that recognition, along with pity or concern for the Other, are the first steps to recovery. But if government programs hand him the damned things with the attitude that as long as you're a worthless piece of expletive deleted whose inner life is dead and whose outer life is only worthwhile as a receptacle for the paid perversion of others, you might as well give some good customer service by wearing latex--then any beneficial aspect is gone, and the potential path to virtue that begins with individual choice erased altogether.
The Holy Father would no more approve of prostitution than he would condoms. But His Holiness is following in Someone else's footsteps, by caring about the potential morality and eventual salvation of prostitutes.