This document creates a nice photo directory (2 columns, 10 rows per page). It requires TntMPD 2.0 r68 or newer.
To get the photos to appear correctly, merge to a new document (instead of merging straight to the printer). Then, click Ctrl+A, and then click F9. There's a plug-in called OnMerge Images that is supposed to make this seemless.
Tested in Word 2007, but it should probably work in older versions as well.