There has been a long-standing issue with the emails sent via mailmerge not reliably showing up in Outlook. It seems to be a system-specific issue, perhaps related to third-party addins. Accordingly, you might want to check whether the emails are actually being received.
You also refer to SP1. I'm not sure which version of Office that is for but, IIRC, 2007 is already up to SP3 and 2010 is up to SP2.
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Cheers,
Paul Edstein
[Fmr MS MVP - Word]
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