You can't do it like that as the template is not integrated into the label
wizard.
It will be a bit fiddly to achieve what you want but certainly possible.
Create a new blank document from your template and save it. Run the merge
from Outlook and instead of creating a label merge, at this stage create a
form letter merge and pick the document you have saved as the merge
document. The purpose of this is merely to grab the Outlook data.
When Outlook hands over to Word, change the document type to mailing labels
from the Merge toolbar and continue as for any other label merge.
--
See
http://www.gmayor.com/mail_merge_labels_with_word_xp.htm
--
<>>< ><<> ><<> <>>< ><<> <>>< <>><<>
Graham Mayor - Word MVP
<>>< ><<> ><<> <>>< ><<> <>>< <>><<>