I figured out the answer to this but it's a difficult process. You have to create an item for each variation where the variation group is the same, i.e. color, and the variation desc is the specific variant, ie red or blue. When you import this it will create individual products for all of the variants. On the original sheet go through and replace the ItemID on all those items with the number of the first one. Then delete in the system the items whose numbers you replaced. I found it useful to make another spread sheet that has the ItemID and Delete fields only and the delete field says TRUE all the way down. You can cut and paste the ItemIDs of the variants. After all the variants have the same ItemID and the old products are erased you can import the original sheet and it will add those variants to the system under the same product.
Tech support told me I couldn't do this, it's a bit of a kludge but I've found it easier than using the variant import.