You may find the folowing article and links useful:

http://word.mvps.org/FAQs/Formatting/BookletPrinting.htm

But it's very difficult to tell how to do this because
a. the interaction between Word and any given printer driver is impossible
to predict, particularly during a mailmerge
b. the printer+printer driver may be able to do the whole lot (in other
words, set up Word to output to Letter, set up the driver to do the rest)
c. if the printer+printer driver can't do it, then there are three things
to consider:
  1. how do you get 2 portrait pages onto a single landscape page, with the
correct orientation?
  2. how do you do that on both sides of the paper? In particular, if the
printer relies on you to turn a stack of sheets over halfway through the
process, the likelihood of everything working correctly is very small (in my
experience)
  3. how do you get the correct page sequence so that the front and back of
each cut sheet correspond?

Broadly speaking I'd say you should not change the page layout of your Word
Mailmerge main document from "Letter" size (i.e. rely on other facilities to
get this right. Then...

d. have a look at what your printer driver capabilities are
e. by all means have a look at Publisher and its merge capabilities
f. here, I notice that the full (pay-for) Acrobat looks as if it lets you
set up at least some of the layout features you need. If you have that
product, it's probably worth a look
g. it may also be worth experimenting with the Zoom settings in Word's
File|Print dialog
 h. you may still have to resequence your pages to achieve the end result
you want.

I rarely say stuff like this but frankly it would probably be easier and
cheaper to get a new boss :-)

Peter Jamieson