I don't know why Western Electric chose this as their "standard" or most "popular" touchtone telephone sets.
BUT ... in the early 1960s, Western Electric did come out with a rotary dial "slim" wall telephone, the same shape and size as the "slim" standard touchtone wall telephone. Notice how this "slim" wall telephone is roughly the same dimensions as a Princess desk telephone! It might have been that Western Electric originally intended this as a Princess wall telephone?
Western Electric "knock-off clones", such as 1960s+ era ITT-Kellogg and Stromberg Carlson, and possibly even partially Western/AT&T-held Northern Electric as well, did continue manufacturing rotary dial "slim" wall telephones.
And the very first touchtone desk telephones, those being used as experimental models in the late 1950s and into the early 1960s, as well as possibly the very first public touchtone phones in 1963, were standard "rotary" housing 500 sets, with the 10 (or later 12 or Autovon 16) button keypads arranged in their 3x4 (or 4x4) matrix placed inside of a "round" complete "component" that "replaced" the500 set's rotary dial component. Again, there were some of these "knock-off clone" manufacturers such as ITT-Kellogg and Stromberg Carlson, and possibly at times even Northern Electric, which continued to market these touchtone desk phones that used traditional "rotary" housings, only that the DTMF 3x4 (or 4X4 "Autovon") keypad was placed where the rotary dial would have been.
And, this "rounded component" for the 3x4 (or 4x4 16 button Autovon) keypad could also be placed where the rotary dial would have been in a standard 2-gong (larger) 554 wall telephone base, using a 554 wall telephone's standard "rotary" housing. Again, ITT and Stromberg, and possibly Northern Electric, marketed this arrangement as well...
And ITT and Stromberg (and possibly Northern) also marketed the "slim" wall telephone with touchtone keypad.
Note how the Princess desk telephone in the "touchtone mode" has an outer housing that has 10 or 12 or 16 squares "cut out" to fit over the buttons. Similarly, the "slim" wall telephone when used for touchtone, also has 10 or 12 or 16 little "cut out" squares to fit over the buttons.
I honestly don't know WHY Western Electric chose to do things a bit "differently" for touchtone desk and wall phones... why it was rare for Western to continue to make rotary "slim" wall phones, why they really didn't continue with the "554-like" (2-gong) wall phone with the "rounded component" touchtone 3x4 (or 4x4) keypad, or why they chose to re-do the housing for the desk touchtone phone, making the keypad a separate sqared off component with a "fat, squared" housing?
If you accidently dropped a Western 2500 set with the fat square housing, remember how the face-plate would come loose, and sometimes there could be damage to the internal wires now exposed? If Western would have simply put a rounded outer component with 3x4 (or 4x4) touchtone pad inside, placed where the rotary dial would have been, with a "rotary" standard 500 housing, if you would have dropped that on the floor accidently, there would be LESS overall "trauma" to the phone!
I dunno, but these apparantly were decisions that Western Electric, Bell Labs, and/or AT&T Headquarters made some 40+ years ago, which, IMO, were a bit "silly". They wouldn't have had to design TWO different housings for a 500 or 500-like desk telephone, one for the rotary 500 set, and one for touchtone 2500/etc. desk telephones... Maybe there's someone retired from Western, Labs, or AT&T who knows the reason?