I followed gmayor's advice re: putting in "Next Record" on the 2nd and 3d labels on a template containing three labels total. As a result, I am getting some, but not all, of the behavior on the mail merge I am looking for.

Within any given page of labels (3 per page, one across) the "Next Record" command does produce the merge field value from the next record. However, the second page of labels now starts with the merge field value from second record in the source file and displays merge values for the 2nd, 3d and 4th records. The third page of labels starts with the 3d record and displays the the merge values for the 3d, 4th and 5th records, etc. This happens both with my own custom 3-down, 1-across labels as well as with a test run I did on a standard Avery label template (#5126).

The source file is a simple Excel worsheet containing a single column of values with the first row in this column being the name of the merge field variable.

Any idea what is happening here?