Well, I still haven't found out if you can reuse images from the media library to achieve this. The method I described seems to assign the particular image to the particular product, hence the need for re-uploading each time. I'm pretty sure tweaking the code somewhere could sort this but I'm no techie :-)
For the record, here's what I'm using
Wordpress 3.5.1
Woo Commerce 1.6.6
Organic Themes Photographer 1.4.3
I guess some themes may not work too well with Woo Commerce.
In case this is of any use to anyone out there, I've recorded my screen to show the process. Hope you can understand the accent...