Instead of using the Avery template, choose the appropriate template from Mailings | Create | Labels. In the Labels dialog, click Options... and, in the Label Options dialog, choose "Avery US Letter" as the vendor. Scroll down to 8366 and select it. Note that the labels are listed alphabetically rather than numerically, so you'll have to scroll down below all the labels that begin with 1, 2, 3, etc. (even those with five digits) to get to 8366.

Click OK to return to the Labels dialog and click New Document. This will give you a sheet of labels. They're set up as a table, so make sure you have table gridlines displayed so you can see the label boundaries. You then type each label in the corresponding cell of the table. Note that there is an empty column in the center of the table that makes space between the labels.