In data merge, InDesign will consider everything on the page to be part of the record, and will try to duplicate your Avery Template along with your text block. Try removing the Avery template from the document before trying the merge, and then add it back to the merged document.
I think you're correct that this will work, since I've gotten it to work without any template at all. However, I'm kind of new to this... based on my pages in the top right corner, can you explain how I can remove the Avery template first and then readd it? Thanks SO much for the help!
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You can place guidelines on the page to make sure your finished labels are falling in the correct place. Once you have positioned your text block, use CUT to delete the template file.
then you can place in back by using Paste in place. (before you do this, go to your page setup and uncheck facing pages. That way "in place" will be the same for all pages.)
I thinnk the easiest way to deal with this would be to make sure all the template information from Avery is on the master page. Leave it active while you do the layout in the upper left position ON THE DOCUMENT PAGE, then assign the None master to leave nothing showing but your placholders and added art.
Reassign the template master after the merge.