Hi Adam,
Okay thanks for reporting this.
I just put a fresh copy of the 1.4 Create Mail Merge agent in my mailbox with the same result you've reported. It appears to be a strange problem with my release package (perhaps a Designer bug?) where the underlying DXL ('lsa' file) is stuck on an older version of the agent, it doesn't match the actual agent code that you can see in Designer. I'll have to rebuild the package from scratch and re-release, I'll try to get to that today.
To see this problem in your mail template in Designer, go to Code -> Agents, select the Mail Merge\Create Mail Merge agent, then go Tools -> Edit with DXL. In the block you will see an older SCRIPTVERSION, not the current one (1.4).
Quick fix is to open the normal Agent LotusScript code editor and make a dummy modification (e.g. add a space and delete it) and save your agent in your mailbox to have it recompile, this seems to work for me.
Also, as a workaround, you can get a copy of the agent source code from this project's Documentation area, you might have some success if you want to paste that over the top and save.