Strictly using mail merge, the simplest method would be to add data in the original customer data source as to which appendices to use. Have it input with the original data, not as a user choice when putting the letter together. You switched your numbering style in the middle of your question, first discussing Appendix A, B, C, etc. and then 1, 2, 3, etc. Does this matter? Which do you want?

You could store your Appendices either as separate documents to be incorporated or as AutoText/Building Blocks entries. They could easily be numbered using SEQ fields.