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Do I place a table in the form document?
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You can either do that or select an appropriate labels template from Mailings>Create>Labels.
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You also mentioned transparency. What is it and why do I do that?
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When you create a shape, you can choose it's fill. Choose 'no fill'.
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how do I edit the form(doc). Every time I try to open it to make a change it runs a "SLQ" command
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You can open the document and answer Yes to the SQL prompt before editing. If you answer No and save the document, the mailmerge will no longer function and you'll need to re-do the data source selection.