First, I would have protected Castellano, I would have protected some guys in other years that weren't taken and ultimately would have clogged the roster, so the Phillies might be right.
Some upthread things, both Tarnock and McMillon from the original post are not on the roster (Tarnok isn't even in the org). Also the Phillies knew Castellano would be taken and did some light shopping of him around protection day looking for a version of him that didn't need protection. No other player was in protection consideration for them.
Before looking at the 40, I think it is important to note that the other three guys protected (Abel, Chace, and Cabrera) are all sort of the same system level as Castellano, but are better prospects, so protecting him would have been clogging the roster with the same type of guy.
To the actual roster. The Phillies are at 39, think of that last spot as Painter's in waiting so let's call it 40 for now. The hitters on the roster with options are Weston Wilson, Garrett Stubbs, and Cal Stevenson. Stevenson is here because they have no other depth and the OF depth in AAA is Matt Kroon, Ethan Wilson, and Marcus Lee Sang. Stevenson was also decent last year. That means that Buddy Kennedy and/or Kody Clemens are going to lose their 40 man spots, but that is probably to a LF addition and ideally more optionable depth. None of those spots are going to Castellano.
On the pitching side, Kyle Tyler, Tyler Phillips, Jose Cuas, Tyler Gilbert and Devin Sweet are the 5 guys you really question (though you can throw Alan Rangel in, but they added him to protect him being a FA). Some of those guys will be in whatever the #5 SP competition is or replaced by an acquisition there. They are also definitely a reliever short in the majors so that is one more spot. Let's say it is Phillips and Tyler gone because Walker wins the #5 job and they add a RP. That is one spot available and your RP callups if there is an injury are Mercado, Gilbert, Sweet, and Cuas. The Phillies had fairly good health last year and used 26 different pitchers. If you are carrying another guy who doesn't project to pitch in the majors you are much closer if you have 3-4 injuries to having to throw players into bad spots to make it through or having to DFA depth elsewhere. I think they could have squeezed one more, but it is more tight than you think.
Their general thought is that Castellano doesn't stick. He throws mid 90s, but so does every RP, and his fastballs are very ordinary movement wise. I like the curveball, but it is a plus pitch, not an elite one, and he barely throws the changeup (which does have promise). He had 8 games in AA where he put up a 3.79 ERA (there are two bad stars at the end doing some heavy lifting) and while improved, LHBs hit him decently hard. This isn't to say he is not a prospect, or a terrible one. He was slated to rank 18th on my list in a mediocre system.