If you have MSCRM On Premise and so can get at the SQL Server backend database, then you can use the "Microsoft SQL Server" Product Data Source option.
The way that we have implemented this in the past is to create a separate SQL Server database to sit alongside the MSCRM one, create a View which references the MSCRM database tables and then use this View as the QuoteWerks Product Data Source.
Did you ever get this resolved? We created a program back in 2006 that will sync any product list from any ERP that is sql backend or odbc compliant. We sync the products to QW Datasouce, create folder and product tables. So vendor, mfg, and category are available. it sync via ms scheduler. Just saw this question.
Please Add Capability To Connect "Dynamics 365 for Sales" (Formerly Microsoft Dynamics CRM, also referred to as MSCRM) as a product source. It is great we can connect for contacts, but it would be awesome if we could also connect for products.