BDC columns in lists function slightly different from other columns. I was unable to find any documentation on msdn regarding working with BDC columns. Here's a way that I finally managed to update column value, after many unsuccessful attempts.

 

When you add a BDC column to a list, SharePoint creates several related hidden columns in the background. Important one is named [Entity]_ID. If you're displaying information from "Product" entity for example, the list will contain "Product_ID" column that you must update. This ID column contains encoded and serialized Primary Key value of your entity. SharePoint uses this column to find a match for your entry in BDC catalog.

 

Here's example code to update "Product Code" BDC column in a list.

using Microsoft.Office.Server
.ApplicationRegistry.Infrastructure;
SPListItem item = myList.Items.Add();
item["Title"] = "Product Information";
item["Product_ID"] = EntityInstanceIdEncoder
.EncodeEntityInstanceId(new object[]{"4312"});

item["Product"] = "SomeProductName;
item["Product: Type"] = "SomeOtherValue";
item.Update();