
Hopefully i'm doing something wrong, but look at the screenshot to the left that displays the document.xml of a docx when a mail merge field has been defined. Notice the use of begin and end instead of making use of the hierarchical nature of xml.
But it gets even weirder; if you define a document in Word (i'm using 2003 with the docx plugin) with the mail merge fields and you do a preview before saving the document then the document.xml looks like this:

The xml hierarchy of the last one makes sense, but the first one definitely not. Why the two are completely different, i've no clue...
After doing some research I found out that others have run into a similar issue. See the hyperlink discussion on this blog.