See http://www.gmayor.com/graphics_on_labels.htm
The return address is just text.
You would probably be better not using the addressblock field. Use instead
the individual fields that make up the address.
See http://www.gmayor.com/mail_merge_labels_with_word_xp.htm or
http://www.gmayor.com/merge_labels_with_word_2007.htm

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Graham Mayor - Word MVP
My web site www.gmayor.com
Word MVP web site http://word.mvps.org
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> How do I place a Picture and Return Address on an Avery 5389 (2-card)
> form for mail merge. I seem to have no control over where the merge
> address block is placed and it takes up the whole card not allowing
> for anything else to be placed on the card.