It's me again - I forgot to add that I am using Microsoft Office 2003.

This will be easier if you use the Mailmerge Toolbar rather than the Wizard.
To display the toolbar, select Toolbars from the View menu and then check
the Mailmerge item.

Before you insert any text or the mergefields on the badges, with the
selection in the first label, select Picture from the Insert menu and
navigate to the folder containing your logo.  Using the Format Picture
dialog:

1.    Size the picture to suit
2.    On the Layout tab, select Behind text
3.    On the Picture tab, under Image control, select "Washout" from the
Color pull-down and/or adjust the Brightness and Contrast to suit.

Then, set up the mergefields and text in that label the way that you want it
to appear and then click on the "Propogate Labels" button on the Mailmerge
Toolbar and the set up will be copied to the other labels on the sheet.