You have no control over how a recipient views e-mail and you cannot force a
user to read an html mail in html format so whatever you do is almost
destined to fail. If you want formatting send an attachment in PDF format -
See the article prepared by fellow MVP Doug Robbins at
http://word.mvps.org/FAQs/MailMerge/MergeWithAttachments.htm

No doubt Peter will be along later with his insights on html mail merges,
see http://tips.pjmsn.me.uk/t0002.htm, but I can certainly mail merge HTML
e-mails here using Word and Outlook 2007 (but not currently with Word
2003/Outlook 2007).

As Graham says, you should be able to send HTML format mail if you are using
Outlook, not Outlook Express, and you are using (say) Word/Outlook 2002 or
later. You may also need Word and Outlook to be the same versions. If you
are trying to use HTML mail with Outlook and the emails are disappearing,
have a look through the recent conversations here.

Curiously though, Word 2003 seems actually to send HTML format emails even
when it says it is sending plain text format emails. It just limits the
content to being plain text :-) I don't know if the same is true of Word
2007. But I have no idea what client software would do with those emails.