Once upon a time I had a tape (of the cassette variety) of Jeremy Irons and Kiri Te Kanawa doing My Fair Lady, with much of the dialogue on it too, as I recall. I picked it up at a second hand store. Oh, here it is (http://www.amazon.com/My-Fair-Lady-Kiri-Kanawa/dp/B000OT8XQA/ref=sr_1_10?ie=UTF8&s=music&qid=1221735884&sr=1-10) (Dear God, what is she wearing?). It is quite entertaining and Jeremy Irons can carry an approximate tune, which is a bonus with Higgins. So, that's exactly the kind of casting you need, like you said. Some young thing with an amazing (soprano, not pop) voice and some uppercrust British person who can speak the hell out of Higgins.

Can Knightley do a cockey accent? I think I've only ever heard her use her own more poshish accent. Which isn't even as important as her ability to sing. Unless they got someone for her to lip-synch too, but I think that's considered taboo these days.