Hi Owen,
The limitation is likely coming from Word itself
http://support.microsoft.com/kb/242986/en-us?FR=1
rather than the Direct Mail Manager (Office 2000 only) add in but see if the steps here help.
http://support.microsoft.com/kb/219252/en-us?FR=1
If you're doing an envelope merge in Word you'll also get that.
FWIW, the barcode isn't required to send out mailings and the Word barcode no longer qualifies (not updated for Delivery Point
coding) for bulk discounts.
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When I design labels, it won't print barcodes on labels less than 3.25
inches, even though when I print a page (with the 2-wide format), they will
clearly fit on the 3-wide labels. Any suggestions? >>
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Let us know if this helped you,
Bob Buckland ?

MS Office System Products MVP
*Courtesy is not expensive and can pay big dividends*
For Everyday MS Office tips to "use right away" -
http://microsoft.com/events/series/administrativetipsandtricks.mspx