How do I set Word to default the printer paper type to labels when the Label
wizard is used?
Mostly you don't. The paper type setting is in a dialog provided by the printer
driver, not by Word. You might be able to affect it with a macro, based on the
information in
http://pubs.logicalexpressions.com/Pub0009/LPMArticle.asp?ID=116,
but it's far more work than I could justify.
If you're going to use the Print button in the label wizard, then you can go to
the printer's Properties dialog from the Start menu > Printers and Faxes menu
and set the paper type there (and remember to go back and reverse the setting
afterward).
The alternative is to use the New Document button in the label wizard, then use
File > Print (or Ctrl+P) and set the paper type in the dialog reached through
the Properties button in the Print dialog (which is really the same dialog
reached through the Start menu, but applicable only during the current Word
session).