I know if I were printing envelopes or labels I can add a postnet barcode from the zipcode. But on a mail merge form letter which is being folded into a windowed envelope how do I place a postnet barcode on the letter in the merged address area?

It is my understanding that the barcode produced by Word is no longer post office compliant and using it can actually slow the mail down. But if you want to do it:

after you put in the address fields or address block, bookmark it (or at least the zip portion).
Place the insertion point where you want the bar code
Insert tab > Quick parts > Field
Choose Barcode
Select the bookmark name
Tick the Postnet checkbox
Click OK