I just want to know if there is an issue with the development of a prototype using iterative waterfall model in comparison to using prototype lifecycle?
The goal of a prototype is to learn more about your product. An iterative waterfall method still puts the analysis and design up front and then iterates through building - you still assume you know what needs to be built. This pushes learning to the end. The prototyping lifecycle is cyclical and wraps learning in as you go. Given the purpose of the prototype, an iterative waterfall seems to work against that purpose.