Fee level indeed represents the options selected within a price set for a given event (if you look at the "Events" tab on a contact record, you will see a column where fee level selections are concatenated per event registration).
To avoid duplicate participant records, I'm thinking you might need to do this in two passes - first, import the participants without any associated contributions (using the GUI import wizard should suffice), then import contributions. Since you can't use the GUI to import multi-line item contributions, you may wish to make use of an API if one is already available so that all of the relevant financial tables will be updated and all entity tables linked accordingly.
Hope this helps,
Tamar