For example Lets use the Marrutact from Sandstorm, it can cast as a 5th level wizard. if it then takes a prestige class that requires the ability to cast 1st level Arcane spells and advances arcane casting such as Abjurant Champion. assuming it meets all other prerequisites does the Marrutacts spellcasting improve when it takes a level in Abjurant Champion or does it gain no benefit?
Usually cases like this have statements like “this stacks with any levels you may have in the Wizard class” to indicate that it works the way you’d like. However, I’m not convinced that such statements are necessary. The rule for Marrutact (and for others, most notably the Cleric or Sorcerer spellcasting of True Dragons) indicates that they have the spellcasting ability of that class at that level. There are no qualifications on the statement, it’s pretty absolute. I am aware of no rule that distinguishes between these “effective levels” and actual levels: just as prestige classes grant more levels of spellcasting, so too do these racial hit dice, in my opinion.
The fact that prestige classes explicitly state that they stack with your levels in the class you’re progressing helps, since the racial feature does not state this. When determining if two things stack, only one of them has to state that it does, after all. The question becomes somewhat murkier if you’re talking about just taking Wizard (or Cleric or Sorcerer) levels, since the base class does not state that it stacks.
But ultimately, I’ve never met a DM who refused to allow this interaction. It seems appropriate and I’m dubious that there are any cases where it is broken to do so (at least, assuming the base creature wasn’t already broken on its own; there are definitely cases of that – Black Ethergaunt, I am looking at you).