OK I found the trick.

I need the IDE/project only for debugging, therefore I created a project of type "Standard Make C project" without any 
sources in it. Even though I specified the full path to the application binary directly in the launch configurations 
dialog, the IDE still seems to require the so called "output" path to the binary, not just the full path to it.

I went to the Project->Properties->C/C++ Project paths then to the Output tab and added a path to the binary as a linked
 resource.

Voilà, Now I can select the binary using either the "Search Project..." or "Browse..." button and have source level 
debugging of a binary created with my custom makefile