Can multi-environment configuration be used in 'index.php'? On my local dev sever, as well as the production server, the craft folder is one level above web root, so $craftPath in index.php is set like so:

$craftPath = '../craft';

On the staging server, the craft folder is two levels above web root, so $craftPath needs to be:

$craftPath = '../../craft';

Can this be accomplished in a single index.php file? Something similar to the multi-environment array in config/general.php and config/db.php perhaps?
Should be able to. Use a switch statement to check on the host and then server up the correct environment configuration like so:

public/index.php:

switch (strtolower($_SERVER['SERVER_NAME']))
{
    // Staging
    case 'stage.mydomain.com' :
        define('CRAFT_ENVIRONMENT', 'stage');
        $craftPath = '../../craft';
        break;

    // Local
    default :
        define('CRAFT_ENVIRONMENT', 'local');
        $craftPath = '../craft';
        break;
}