
I think that mail merge to Word docs can work well, at least in a general sense. The kicker would be whether there is something unique about this particular scenario that would require more dynamic structuring of the document, or whether it's a boilerplate document with a handful of dynamic fields.
You can create Word templates to use with reports that you create regularly. Then defining mail merge fields in those documents allows you to combine the boilerplate text with the variable text in the mail merge fields.
I'm not sure how that would work with subdocuments, but at least in theory, the principle would be the same.
It's possible to manipulate Word documents in VBA. That said, anything very complex might be a bit of a reach for that method. You might be better off with a handful of Word Templates for different standard scenarios, rather than trying to manipulate them with VBA.
Having do both over the years, I'd choose the former method over the latter. Word documents are usually not highly structured enough to be all that easy to modify in code.
Maybe if you could provide a sample of what needs to be produced, a more concrete description of what to do would be possible.