It seems to work OK here, but if you are intending printing the envelopes and letters separately, why not simply merge the envelopes separately from the letters, using the same data source. I can't see any practical reason why you woiuld need the envelopes and letters in the same document. You need an envelope template for that, which is easy enough to create. Or you could use the sample provided with
http://www.gmayor.com/Envelope_Label_Add_In.htm which, incidentally, can also be used to print the envelopes directly from your (Excel) data source, without the need to merge them.