To future like minded folks: Yes, it is possible. I did it.
Here's a trip report on my journey getting the car home.
The paperwork is not hard, but it really does hinge on getting that letter of compliance from the manufacturer. This path also only works for certain vehicles that are, you know, functionally equivalent. In my case, I ended up asking the seller to ask VW for the letter, which he was willing to do. The letter is attached to the car, not the person requesting it, so no worries there. From what he said, it was not difficult, and it took maybe a week for them to issue the letter.
The other three forms are for the NHTSA, EPA, and CBP. The NHTSA HS-7 one is straightforward, and concerns lighting and other safety equipment. The only hitch is apparently sometime in the early 2010s there was a gap where the US required TPMS systems but Canada didn't, so some cars may require a retrofit to be legal for import. That was not a factor for me, but was something I have read during my research.
For the EPA 3520-1 form, it's easy if you have the letter of compliance. You will have to put your info down multiple times as both the owner and importer.
For the CBP 7501 form, it depends on the border crossing. I had mine partially pre-filled out, and they had me start over with theirs for the crossing I was at. I don't think it hurts to try pre-filling it, but it's got 22 pages of instructions which reference other documentation (Do you know what an HTS code is? I didn't, until I tried to fill out this form).
I got lucky and was the only person in the building for most of my transaction. Saturday at 7pm isn't a hot time for border crossings I guess. There was one group ahead, and one came in as I was leaving. It was 7pm on a Saturday. The whole thing took 3 minutes. I had read that they would give me a single piece of paper stating the acceptance of the entry, but instead they just stamped the forms I had brought. No one seemed unfamiliar with the process, the only question they asked me was about the plate status (basically, how I was driving it legally), and took my explanation without further ado.
The RMV transaction was also super easy, took maybe 15 minutes. I'm currently waiting on the title, but I have a valid registration. I'll be trying to get it inspected this weekend.
And was it worth it? Abso-berkeleying-lutely! The extra long ratios of the DQS/FRF 01E make highway cruising a dream. It's turning maybe 2200 RPM at 70 mph, and 2400 is 85mph or so. The diesel has tons of torque, and I drove home on less than one tank. IMO, these are truly some one of a kind vehicles, a masterpiece of VW's finest era. The only thing that might be better would be the A4 quattro versions they received in Europe, but even then I'm not sure -- the AWD costs more in fuel and maintenance than the simpler FWD Passat. The MSRP of this car in 2005 would be almost $50,000 in today's USD, but considering it's relative simple mechanicals, cruising comfort, and fuel economy, I don't believe there's anything available for that price that can truly compare.