After four days of effort, Ive got there! Thanks a bundle MS for making an easy task to incredibly challenging.
Download the label template direct from Avery. Save and open as a .doc. Convert to a .docx, save and open as new. Start MailMerge, select Labels, find your label type and then CANCEL, this will initiate the MM wizard. Find your Outlook data. I had selected and saved mine in a new folder under the full contact set. Add the Fields as above, Format the Fields as above, check the Preview then Final Merge with Edit to New Document. Make any individual adjustments for line length. Double check, triple check every Printer setting, in the document and every printer setting option as MS will keep setting back to Letter, override paper source and make sure to uncheck Auto adjust sizing for large documents and Normal Size is selected.
Good Luck!