You can do this with the data frame extent options. In 10.0 there are new options that allow you to drive the extent of one data frame based on the extent of another data frame.
To make a locator map that automatically adjusts as you page through your map series try this:
1. Go to the properties dialog for your locator data frame and select the Data Frame tab.
2. In the Extent section at the top select "Other Data Frame" from the dropdown.
3. Now you should see options to "Derive the extent from another data frame's extent". Make sure the DDP data frame is selected in this dropdown (it might show a different data frame selected by default if you have more data frames in your map).
4. Set the margin options if you want a consistent margin, or select "Zoom to features that intersect the other data frame's extent" if you want to make sure surrounding features show. The latter is useful if you index layer is a rectangular grid, for example.
I hope that helps

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