Hi pgrant,
Do you have similar issues with an ordinary Word mailmerge? Likewise, do you have similar issues with an Outlook mailmerge?
Assuming the former, here is an MS Knowledgebase article that may apply to your situation :
http://support.microsoft.com/kb/322215/
Although your system may not be experiencing the same symptoms, it may be worth resetting the Microsoft Data Access Components (MDAC) software.