For your custom letter template to appear in the list of Page Designs in the
Microsoft Word Letter Wizard, the letter templates you create must be saved
in the "Letters & Faxes folder Word 97) or the Templates\1033 folder (Word
2000 or 2002). The word "Letter" must be in the file name. Details here:
http://support.microsoft.com/support/kb/articles/q181/2/73.asp
http://support.microsoft.com/support/kb/articles/Q197/3/40.ASP
http://support.microsoft.com/default.aspx?scid=kb;EN-US;Q210884
http://support.microsoft.com/default.aspx?scid=kb;EN-US;Q291186

Once you have set up your Custom Template(s) you should see it as a choice
when you use the New Letter to Contact option in Outlook.

You cannot load boilerplate text in the body of the letter template. You
must create AutoText entries for the boilerplate. The easiest
thing to do would be to create one template and load the text for each
letter under its own style -- see KB article Q170342 (WD97) or Q207925
(OL2000).

Take a look here for some other ways to merge Contact data to a new letter
to a Contact:
http://www.slipstick.com/contacts/startletter.htm