Propably just depends on what you are doing at the time. If you are already in your database then the report is quick and easy otherwise you'll have to go through the hassle of opening the merge again.
In terms of the difference within the actual report I guess the fact that Access gives the ability to shrink and expand fields to supress blank values which could look confusing.
Precisely as christyxo said. Sending it over to Word is good IF you really need some good fancy facelift done to the output as you can design very creative forms in Word as opposed to Access. But, as stated it's very easy to just use Access, since you're already in it. However, I think if you have set up your MailMerge document once, you can go back to it in Word alone and when it opens click on the Merge now button. It should give you the option of altering the data you pull in from there.
Just a matter of choice (and labor)