2 answers
Label formatting is always an issue because there are various paper / label sizes. I have created Visualforce page to print labels in a project previously. There are some paid apps like Conga Composer on AppExchange that can help you do that.
One more option is to create a Visualforce page - like this one siggested by Kevin Swiggum
http://www.radialweb.com/2010/08/solving-simple-problems-envelopes-using-visualforce/