You can change the folder to a sub folder of My Documents by changing the
foldername in the following registry key:
HKEY_CURRENT_USER\Software\Microsoft\Office\11.0\Common\DataServices
(where 11.0 is Office 2003)
Or you could put your data file in the default My Data Sources folder. I
don't know of a way to specify that merge always uses the same data file,
though I sure you could cobble together a macro to do the job.