Been struggling for hours with this issue but found a solution to my specific problem. I thought I'd just share it here in case it might help someone.
When I started a mail merge to roughly 3000 contacts, it started off well but after contact #800 or so, I got the infamous error message. When I then wanted to start a new mail merge for the remaining contacts, I repeatedly got the same error message no
matter what I tried (e.g., start computer in safe-mode, check for updates, get latest plug-ins, delete certain text and images from the word document, etc. etc.).
Then I noticed that two of the merge fields contained a special character for the first contact in my Excel list. Both the contact's last name and company name (the two merge fields) contained the character é. When I changed this to a normal e and tried
the mail merge again, it worked without any issues (in HTML format).
Hope this saves someone some frustrations.