The following is from the Business Objects web site knowledge base:
Since the Mailing Label Report Creation Wizard dialog box cannot be re-entered, it is not possible to modify the 'Mailing Label Type' of the report.
To workaround this limitation, change the dimensions of the mailing label through the Layout tab of the Section Expert.
Report > Section Expert > Details > Layout tab (The Layout tab is only available when the Details section is highlighted in the Section Expert.)
MrBill