Zoran
Hard to say what the problem is but I do the same on Win98 Word 2000 so I dont think that is your problem, although it might be to do with the way you have installed Word 2000.
I had the same problem recently and I finished up re-installing Win98.
If you open Word and try to do a manual mailmerge from there does it work or does it fail because it can't open your database file.
Do you have VFP installed on the client pc?
I don't have the answer but perhaps that will give you something to think about/
Colin
Specialist in Advertising, Marketing, especially Direct Marketing
I run courses in Business Management and Marketing