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Merges in Word 2007 are backward compatible in Word 2003 by...
Open Word 2007
Click the Office Button (that'll be the new big fat button to the top left of the Word 2007 Window)
Click Word options
Click ‘Save’
Ensure that files save as “Word 97-2003” format (*.doc).

If this isn’t done in Word 2007 then there are definite compatibility problems opening up previously merged or edited documents (despite saying “compatibility mode” in the task bar).  These files have to be re-opened and then ‘saved as’ to force a file conversion back to the Word 2003 file format.
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