I would start by creating a table where each cell is the size of a name tag. (If you're using Avery Name Tags, most Avery layouts are "built in" to Word ... unless that's just feature we added here at work.)
Paste the picture into each cell, positioned the way you want it to be and set it to be "Behind and Through" the text.
Create a text box in each cell set to No Border (no line) and semi-transparent, and put the name in that text box.
I'm trying now (in between meetings etc) to get a mail merge version working... but I thought this might get you started.
