Microsoft word - conditional formatting in mail merge?

Using If..Then..Else is the right start as it inserts an IF field into the document which is what you need, however the dialog which comes up isn't powerful enough to do this kind of thing so you will need to edit the IF fields manually in the document.

What you will need to have is IF fields which compare the value of the field and will display the field with desired color for the appropriate value. Don't forget the MERGEFORMAT switch so that this color is passed on to the merged text.