Have you tried setting this up as a mail merge? The way you are doing it it sounds like it should work ok but we're talking about MS software here!

Without looking at your files I couldn't say why the formatting isn't working.
My understanding of what you are doing is:
You have a boiler plate Word doc that you have any number of placeholders that will be someone's name, and other such data - be it text or numbers. These placeholders will change for each new iteration of the Word doc so you have set up an Excel spreadsheet to enter the placeholder changes (data) to then populate the Word doc.
You can do this through a mail merge instead of using the data links. You would then merge the doc each time pointing back to the Excel file.
Give it a try and let us know if it works.