You either have to choose the DDE connection method (you have to have Excel
on your system, then check Word Tools|Options|General|Confirm conversions at
open, then go through the connectionprocess again and select "Excel via DDE"
when prompted) or you have to put numeric formatting "switches" into the
MERGEFIELD field in your mailmerge main document - e.g. use Alt-F9 to show

{ MERGEFIELD myfield }

then add text after myfeild to make it

{ MERGEFIELD myfield \#"0.00" }

You'll find more information about these switches in Word Help.

--
Peter Jamieson
MS Word MVP