The wax figures look like real people because they ARE real people. The original plan was to use actual wax figures, but they melted under the heat of the lights used at the time to film two-strip Technicolor.
This film was produced before the Production Code. When it was re-made only 20 years later, as House of Wax (1953), all references to drug use were removed and a character was changed from a junkie to an alcoholic.
To emphasize the similarities between the wax figures and the characters, some names are alike. For example, the suicidal Joan Gale inspires the statue of Joan of Arc. Charlotte, who should have been killed to recreate de figure of Marie Antoinette, was also the real name of the young lady who killed Marat, from the 'Assassination of Marat' depicted in the museum.