Word Was Unable to Open the Data Source


When trying to merge an excel doc with word doc so that I can send form letters I get the following error:

Word was unable to open the data source.
When I select ok, I then get "There is not enough memory or disk space to convert this document.

I have 384mb and 40gb of space on my disk.
The excel spread sheet has about 125 rows and 10 columns and the word doc is one 8 1/2 x 11 pg. I don't think the issue is memory or disk. Any ideas?

Thank you