What exactly are you trying to do? The labels option in Word 97 uses templates provided by leading manufacturers to suit their label stationery. Which Avery Label are you intending to use? and for what purpose?
You can for example type a single label at a time into a template and tell the printer to print it individually from a part used sheet or obviously print a sheet of the same name & address.
I think what you need to do is to set the graphic with "No Wrap". If you right click on the graphic and select the "Format Picture" option and then click on the "Wrapping" tab you should be able to select "None" for the wrapping. This will then allow you to place the graphic where ever you like.
For finer control over positioning of the graphic press and hold down the Alt key while dragging the graphic.
I don`t quite agree with Peter I think you need Text to the right but a little experimentation won`t go amiss. Also look for the option when importing the graphic to "Float Over Text" I think you can do this from the format picture dialog box as well.
I downloaded Avery wizard and it works fine, but I now use the (free) Avery Design Pro download and find it even more practical and versatile. You can add anything to the labels and link to a database/excel list.