It should work, but let's just go through the steps and start from scratch.
First, I would enable the mail merge toolbar.
a. start with a blank new document
b. click the first button in the mailmerge toolbar and select Directory
c. click the second button in the toolbar and select your data source
d. select the field or fields you want on each line from the dropdown on
button 6 (just before "Insert Word Field") and insert them
e. draw whatever underline you want using e.g. underscores
f. lay out the line as you want it (probably using tabs to align the start
of the underscores)
g. add one paragraph mark at the end of the line (i.e. when you click the
Show/Hide icon near the right hand end of the standard toolbar, you should
see two paragraph marks in your document
h. click the "Merge to new Document" icon near the right hand end of the
Mail Merge toolbar and complete the merge
i. your output document should have what you want, nothing more, nothing
less. With any luck :-)

My guess is that either you
a. have a page break at the end of your mail merge main document or
b. you are previewing each record and using the regular print facility to
print it.

Neither sounds particularly likely but there you go...

Peter Jamieson