Thank you for your post.
Your post is fine, and you are definitely not doing anything wrong.
If everything presents itself properly on the layout, you can print to a PDF file using the option "current record". You can then use "Send Mail" from the File menu and attach the file to the message.
Also, you can put the merge information into a Calculation field, and then use the calculation field in the Message section. This way, no attachment is necessary. A sample calculation could be:
"Dear " & FirstName & ":¶¶This is to inform you that your payment is late.¶¶Sincerely,¶¶kls"
That is, this inserts the FirstName field into the proper place in your letter. The ¶ character represents a return character. If FirstName in one record contains "TSGal", the resulting calculation would be:
This is to inform you that your payment is late.
Please let me know if you need clarification for any of the above steps.