After much trial and error, I figured out a way to insert a degree symbol
that would merge successfully from an excel file to a word merge document in
2000.  

I also discovered that not all "symbols" are created equal, in that some of
them  DO make the transition during a merge, while others don't (!)

If the  "superscript 0" is used, instead of the actual degree symbol, it
will merge successfully!  However, the superscript 0 cannot be inserted using
the numeric keypad (alt-0186), but must first be inserted into a Word
document, then copied and pasted into the excel spreadsheet formula.

Wolla!