Bryan,

Yes you can create lables with specific size.  Just check
your label size, and you can finnd many size options.  
Actually Microsoft Word has some manufacturers listed on
the option, complete with the product numbers of each
manufacturer.  Just choose which one your label is.

Here is my explanation to help you out with mail merge.
Go to:
"Tools" -> ""Letters and Mailings" -> "Mail Merge Wizard".

Fist Step:
Under Select document type, select the type of documents
you're working on.  Then click "Next: Starting document".

Second Step:
Select 'Use the current document' option then click
on "Next: Select Recipient"

Third Step:
Now you have to select the people you're going to send
the letter to. It can be done using Excel or Access
tables. Just select 'Use an existing list', then open
your contact database by clicking "Browse...". After you
finish just click on "Next: Write your letter"

Fourth Step:
Write your letter and insert merged field into your
letter. Click on "Address block..." to write your contact
information. And "Greeting line." for the greetings. Then
click on "Next: Preview your letters"

Fifth Step:
Preview your letter. You can see who your recipients are
and if you finish, just click on "Next: Complete the
merge"

Then you're finish. Now you can view your letter and also
your recipients. You can also print it all
(click "Print."), or edit specific letters (click "Edit
individual letters.").

I hope this helps.

Sincerely,