A non-separable method for time-dependent quantum simulations of large polyatomic systems is presented and applied to the dynamics of the I2Ar17 cluster, following electronic excitation of the iodine molecule. The new method is an extension of the Classical Separable Potential (CSP) approximation, in which the evolution of each mode is governed by a time-dependent mean potential due to the other modes and the total wavepacket is a product of single mode wavefunctions. The computational effectiveness of the CSP approach stems from the use of classical Molecular Dynamics (MD) trajectories, carried out at the outset of the procedure, for obtaining the effective single-mode potentials. The present method generalizes the CSP scheme by a Configuration Interaction (CI) treatment, in which the total wavepacket is represented as a linear combination of separable terms, with coefficients determined from the time-dependent Schrodinger equation. The single mode wavefunctions for each configuration are propagated along effective potentials that are generated using individual classical trajectories. The classical MD simulation is also used for simplifying the dynamical equations for the CI coefficients. Thus, the selection of correlations that are included quantum mechanically is guided by classical mechanics, which is the basis for the computational efficiency of this approach. The CI wavepacket for the I2Ar17 system with 51 vibrational degrees of freedom was propagated for 500 fs following I2(B<-X) excitation. About 1500 configurations proved sufficient for convergence of the CI series. The separable approximation to the wavefunction holds for 60 fs and begins to break down upon the first collision of the iodine atoms with argons. After the second iodine-argon collision this breakdown is almost complete, and at t=500 fs the CSP term represents less than 5 % of the correlated wavepacket. Both absorption and resonance Raman spectra are, however, well described by the separable CSP method, since they are dermined within the first 60 fs. The CI-CSP method offers very good accuracy due to inclusion of important correlation effects between different modes, while remaining computationally feasible for systems up to a hundred degrees of freedom and more.