I think underage models are never a good idea because they give unrealistic views & expectations of what a woman's body is like or should be like: it is not the same as a little girl's body. I tend to think 16-18 is a strict minimum. There is no upwards limit. It depends on who you market to. Retouching is not necessary. Women should look their age. There is absolutely nothing wrong with aging, or being imperfect... or not having a little girl's body.
The Giles Deacon catwalk at 2010 London fashion week featured several old models included the former German supermodel Veruschka age 71. Everything is possible in the fashion industry but the show looked a bit wired thought!. I will post an article about the London fashion week very soon, check out this space http://designersconfidential.blogspot.com/