Microsoft Word's spell check functionality is present only in the letter template, not in the completed merge document, so to ensure your final merged document doesn't contain any misspellings:

  • Spell check the document in the template before merging.

    OR 
     
  • Copy and paste the contents into a blank document and run spell check.
The Spelling & Grammar option is available when using Word 2010.  Once the letters are merged and are previewed, on the Review tab, Spelling & Grammar is available for spellchecking.