Stop using the address block field and insert the individual fields that you
require (see http://www.gmayor.com/mail_merge_labels_with_word_xp.htm and
http://www.gmayor.com/mailmerge_from_outlook.htm  )

If you have a means of automatically identifying which records require which
salutation then you can use conditional fields to pick the correct version
e.g.. If your record has a first name, you may wish to use Dear FirstName.
If it has only a surname, you may wish to use Dear Mr Surname and if it has
neither, you may wish to use Dear Sir.

In the case of a merge from Outlook this could be:

Dear { IF{ MERGEFIELD First_Name } <> "" "{ MERGEFIELD First_Name }" "{ IF
{ MERGEFIELD Last_Name } <> "" "{ MERGEFIELD Title } { MERGEFIELD
Last_Name }" "Sir/Madam"}"  }