Try without the preview step.
I have done that with the same results.
If it is helpful to note, it always chooses the 8th row and repeats that data. If I ask it only to insert specified rows and there are more than 8 it will take the 8th from that number. For example if I want it to insert rows 11-29 it will choose row 18 and repeat.
Have you updated CS3 to the latest patch?
You might want to try rebuilding the template file in a new file and do the merge without the preview. Preview is buggy in newer versions, but I thought CS3 was OK. That said, once you get this type of failure it sometimes gets "stuck" in the template file.
Thanks for your help, I remade the document and followed the same steps and it seems to be working. Appreciate it.