Brent,

It does work.  I guess you just have to know how to work it.

After you select Mailing Labels from the Document type pulldown in the
Outlook "Mail Merge Contacts" dialog and click on the OK button, the paper
clip guy tells you to click on the Setup button in the Mail Merge Helper
dialog.  That takes you to the Label Options dialog where you select the
label product that you want to use and click OK.  You then either Click on
the Edit button in Section 1 of the Mail Merge Helper dialog and select the
document that is listed there or just close that dialog.  As a result of
some step in the above process, the Mail merge toolbar in Word is made
visible.  On that toolbar, you have to click on the 6th button from the
left, the Insert Merge Fields button which will display a dialog box
containing all of the fields from the Outlook Contacts.  After setting up
the fields in the way that you want them in the first label on the sheet,
you must click on the 11th button from the left (Propogate Labels) which
will replicate the setup of the mergefields onto all of the labels on the
sheet.  Then you execute the merge by using one of the buttons on the
right - either to a new document, or the printer.