In Word 2007 you have the possibility to merge a document template with data from a data source, creating for example a mailing very easily. The data source can be various types of documents, like Excel, Word or Access files. But it turns out that Word 2007 cannot handle data source documents on an http location.
When opening a mail merge template document and you try to connect a source document which is located on a SharePoint site (Mailings > Select Recipients > Use Existing Lists > My Network Places > Select document on SharePoint site), Word 2007 gives the error message “This file could not be found”. A workaround is to download the source document to the local computer (for example the desktop) and connect it there. The downside is that you have to download the document each time you want to do a mail merge.
Hopefully this issue will be fixed in the next Office Service Pack.