Here is a sample disk label template; it works with Avery
3 1/2 labels #5896. You'll need to jockey around the
single label depending on what information you're merging
and how many lines it takes up. 

The key thing is to look at your Page Setup options, then
at your Label Printing options, then make sure you click
on ENABLE LABEL PRINTING.

Good Luck,

Brian D. Gockley
A-CT Atari Group