After few hours of battling to configure datamergeusing the examples supplied with the distribution, i enventually figured out what the problem is. I was running Arbortext 6, 64-bit and trying to connect to a 32-bit ODBC source (I run 32-bit office).
I must have missed the point in the docs where this is pointed out.
Reinstalling 32-bit Arbortext solved the problem.
Has anybody figured out a way to use the 64-bit arbortext and access 32-bit ODBC sources?