I did this very thing today, I made my two columns in Excel, and then selected the range and pasted it into the Lookup Table in Monarch (v7.02). Make sure you select your source field first before you do the paste. You won't have a cursor per se, it's implied, just hit CTRL-V and your range will be pasted.
What Nick said, especially if the Inactive Items list is pretty much a constant rather than something that changes regularly.
However if you need to re-generate the list for each run of the analysis, then it may be more convenient in the long term to do it with an external lookup - assuming you have a suitable PRO version of Monarch.
Once you have populated your Inactive Items worksheet (using Monarch?) simply perform a lookup directly on that file.
It would probably be a good idea to save the whole Monarch part of the process as a Project (for consistency and ease of use) and very likely you could then creat a batch file to run the entire exercise as a single process.
I hope this helps.