Better off just getting a good laser printer and use label sheets that are made to go through laser printers. For ~$1000 you should be able to get a high qaulity printer that will handle more then 500 sheets at a time.
The dot matrix/form feed printer is going to produce crappy quality prints and be [essentailly] a one trick pony. It will also make the labels look very cheap and that you didn't give a damn about how they look. If that's the case, then go ahead and try and hunt down a dot matrix printer worth a damn.
IF you want laser, then you won't get form feeding. Laser, by it's very nature, needs to run the pages through a fuser assemble to fix the toner to the media/paper.
The only other option is to get a continuous feed press and run it that way. Then again, that will just reproduce what's on the plates, not make each label different.
You really need to decide what's most important.
Quality of image
Printing out just labels on the printer (nothing else)
Having a printer that does several things well
Having a printer that does one thing 'ok' at best
Personally, I've not had a dot matrix printer in about 15 years. I went to inkjet printers a while back (used laser printers through college and at ALL jobs) and picked up a laser printer for at home about a year ago.