How important is work ethic - in other words, how much will guys improve with practice? Do they stay the same or can a guy who is rated low in some categories become good with a strong work ethic and well used practice time/game experience?

While in general, a player with a high work ethic will tend to improve at a slightly faster pace than an equivalent player with a low work ethic, there are always exceptions. A player may not like the playing time he's receiving and not work as hard in practice - players may not work as hard if the team is struggling, etc.  Also, some players have already reached their full potential while in high school and will not improve much during their college playing days.