Resolved!

For those that are having this issue it was a combination of things.

Macropod was spot on that I didn't need MERGEFORMAT (I also used to have CHARFORMAT but that made no sense so I removed it).

THe reason I used MERGEFORMAT was because the font of the INCLUDETEXT was always Times New Roman 12pt. What I realized was the default font of the document was Times New Roman 12pt (originally thought it wasn't).

Maybe I am wrong but somehow when the letters (documents to be imported) are created, they are created using the default font for the user and somehow Word takes note of this. When imported, it uses the "default font" of the document. I say this because if I change the font to something that's not my default on those letters, it works great and is imported with the new font. As soon as I change the letter back to my default font, the mail merge doc uses the document defualt font.

Hopefully that made some sense. Thanks a ton for your help!

Great forum, I will definitely hang around to help out and learn more!