Interesting question. Most of the answers tend to bring morals into it. In my part of the world (New Zealand) prostitution is legal, regulated, and there is a growing acceptance that it is contributing positively to society (providing employment, tearing down gender/sexual divisions, increasing awareness of safe sex, etc.).
So from a moral perspective, I would not have a problem accepting such a contract here in New Zealand. However, even with this moral aspect resolved, there are still ethical considerations in regards to constructing the website. These would include making sure that content is not easily accessible by underage people, and that relevant ethical advertising standards are not breached. For example, from the NZ advertising standards:
Advertisements should not employ sexual appeal in a manner which is exploitative and degrading of any individual or group of people in society to promote the sale of products or services.
So as far as I can see, if you are satisfied on a moral basis that what you are doing is not explotative or perpetuating an exploitative industry, AND you feel you are able to meet certain ethical obligations (which in this case also means that the prostitution agency is also willing to meet those obligations), then I see no reason why this shouldn't be a great oppurtunity for you to add a website to your portfolio.
In terms of explaining this to family/friends, well, I can only say that if you are satified at both a moral and an ethical …