Jason,

Yes, this can be done. My experience is that it is not simple ... but it is much better than applying the changes manually through the UI.

I am using the Excel Connector to maintain our product lists. We have roughly 800 products, but due to different currencies, specification of both license, maintenance and rental "products" for each real-world product,  and several different pricing methods, we have more than 6,000 pricebook entries.

Hopefully you will not have those complexities, but you will need to deal with three inter-related tables, product2, pricebookentry, and pricebook2.

When adding a product, you need to:
   1) Add it into the product2 table
   2) Add a pricebookentry into the standard price book
   3) If you have custom price books (we need them both for pricing models and currencies), then
         add a pricebookentry into each of the custom price books appropriate for the product

When adding pricebookentries, 
    ProductCode and Name are read-only and should be ignored for creating/updating.

    For entries in the standard price book:
          > UseStandardPrice is set to FALSE. (This must be TRUE according to the documentation, but from my experience, this documentation is wrong)
          > The  price, which will become the standard price, should be specified.

    For entries in the custom price books,
          > UseStandardPrice is determines whether the standard price, or a custom price, is used. If it's TRUE, then you should not specify a price.

The relationships are

      PricebookEntries are keyed on their own PricebookEntryId
          Pricebook2Id, in them, points to the pricebook
          Product2Id, in them, points to the product
          UnitPrice, in it, may be calculated or not.
             If the Pricebook2Id points to the standard price book, then it is specified, and is standard,
             else if UseStandardPrice is FALSE, then it is specified, and is the special price,
             else if UseStandardPrice is TRUE, then it is calculated by lookup iwth the Product2Id and
                the key of the standard price book.

My solution is implemented in a horribly complicated Excel sheet. The basic approach is to

    1) Build a new set of pricebook entries, using information from external price sheets, which is "keyed" on logical values, rather than salesforce.com ids. In my case, this is a combination of detailed product code, pricebook and currency.

    2) extract all the existing pricebook entries into a second sheet

    3) join the information, matching on the logical keys

    4) compare stored and target values, indentifying lines which need inserting/updating 

    5) sort by those expressions, and use the Excel Connector to perform the updates.

The building of pricebook entries (1) is done with calculations and some macros which duplicate multiple entries for each product. For example, a simple product will have 9 entries: 
    Three for each price book, to support three currencies, and
    Three price books (Standard and two custom)

The extract is done using a Connector Query Table Data.

The join is done using a calculated common key value in both tables (concatenating together the values for the product code, currency, and pricebook) and VLOOKUP functions. This is not elegant, but it works .. albeit slowly.

The compare is calculations in the joined Excel table, with some conditional formatting to make things obvious during a review, and

The updating is done with the Connector Update Cells function.