0) Use Version 3.1 oder 3.2(RC5) on Linux or Windows, the results are the same.
   The screenshots were made on a German version, so I cannot provide 
   the exact EN UI terms, but will give a generic translation in brackets.

1) Create a new spreadsheet with data to be merged (2 columns, some records) 
   like that:
	Number	Numeral
	1	one
	2	two
	3	three
   (and so on). Save it as "merge-data.ods".

2) Create an empty writer document, save it as "merge-layout.odt";
   it should default to an "A4 portrait orientation" page layout.

3) Start "Extras"[Tools]/"Serienbrief-Assistent"[mail merge wizard]

4) Choose its first option (to use current document)

5) "proceed >"

6) Choose first document type "Brief"[letter]

7) "proceed >"

8) In the 3rd dialog, 
    press "1. Adressenliste auswaehlen..." [select address list]
   "Hinzufuegen..." [add...] and navigate to the spreadsheet 
    created above at step (1), 
    then deselect the second option field to add an address block.

9) "proceed >"

10) In the 4th dialog, deselect the first option to insert a salutation.

11) "proceed >" will take you to the 6th dialog

12) Choose "Dokument bearbeiten" [edit the document]

13) Press F4 to open "Datenquellen" [data sources]; "Sheet1" will be displayed

14) drag the two column heads ("Number" and "Numeral" in the sample attached) 
    into the empty document and write the word " is " between them

15) Make the paragraph centered, raise fontsize to 44, 
    define an extra 8 cm distance above the paragraph

16) Duplicate this single paragraph by copy and paste.

    - Now we have a layout like we'd like to print A5 handouts on A4 paper,
    labels or something else that needs more than one record per page. -

17) Return to the mail merge wizard, use its navigation buttons 
   at step "6. Dokument vorbereiten" [prepare document] 
   to browse through the records:  

   You will see same data in both paragraphs - that's correct so far.

Now lets demonstrate the bug:

18) Choose "Dokument bearbeiten" [edit the document] again.

19) Place the cursor at the ende of the FIRST paragraph
   (i.e. between the second field and the paragraph symbol)

20) Choose "Einfuegen[Insert]/Feldbefehl[command
field]/Andere...[Other...],Datenbank[database],Naechster Datensatz[next record]"
and press "Einfuegen" [Insert].
20a) Optionally: Press Ctrl+F9 to verify that a "Next record" field actually has
been inserted, and press Ctrl+F9 again.

21) Return to the wizard as in (17) and browse through the records:

You will notice that only the first paragraph's fields are updated with sample
data, while the second (more general: every field beneath the first "next
record" instruction ) paragraph's fields always remain empty. 
Furthermore, while browsing in our 2-records-on-a-page-example should display
only odd values on the first paragraph, every second preview isn't realistic, at
least if you will create your merge without an offset (but then the even values
on top of the pages were wrong).

If you finally generate your merge with step 7 of the wizard, the resulting
document will be correct, but the misleading browsing experience and incomplete
rendering of field preview unnecessarily devaluates a data preview.

Related issues I've found:
 26878 - mail merge: see values in current document (NEW)
 77724 - Create a mail merge toolbar (NEW)
 20057 - Q-PCD Improve usability of Mail Merge (CLOSED,FIXED)