Cracked it, sort of. The bit I hadn't mention, because I thought it didn't matter, was that the data source is being downloaded from the web. This means that the file arrives "blocked". Going into its properties each time and unblocking it allows it to be used as expected.

So we have a solution but it is entirely unsatisfactory. I can probably train my users to do a Save As when they download so that they don't get multiple versions of the data source named ..(1).csv, ..(2).csv etc. They will probably reluctantly accept the need to not have a merge doc open when they download (the download fails) and reply Yes to "Opening this document will run the following SQL command" (meaningless to the average user) but having to find the file, right click, choose properties, hit Unblock - no, that's going to be just too much trouble.

Taking a step back - all I want to do is show a person's record on a website, have a button to click that creates and downloads a csv file of contact details, and have some pre-defined letters as merge docs for the user to open and merge to printer. Not so difficult you would have thought but, unless someone has a better idea, too beset with technical obstacles to be workable.