I recommend using Adobe Acrobat Actions (I'm using Acrobat Pro X). It takes a little time to setup the first time, but once you have the main action created, generating the different reports with each custom letter is very fast. Those 40 PDFs you'll need six months from now will probably take 5-10 minutes to create.
First Time Through
First, create your merged letters, and export them as PDFs, so then you should have 3 files:
Letter1_Merged.pdf (20 pages)Letter2_Merged.pdf (10 pages)Letter3_Merged.pdf (10 pages)
Then export your Report - Report.pdf (80+ pages)
Now, in Acrobat, open each of the Letter#_Merged.pdfs, then click the Tools tab/button in the top right-ish area, and then click Extract from the Pages section.
Check the box to Extract Pages As Separate Files, and then create some empty folder, (Lets call it Letters) and save the extracted PDF pages there. Make this folder somewhere local on your computer, this will help speed up the process. Do this to the same folder for each of the three Letter#_Merged.pdfs. This will turn your 3 merged PDFs into 40 single-page PDFs named something like Letter1_Merged 1.pdf or Letter3_Merged 10.pdf.
EDIT: If your letters are longer than one page, use Tools > Pages > Split instead of Extract. This will allow you to split your document at every 3rd page, or whatever you define.
Next, in Acrobat, close any remaining open files, and click File > Action Wizard > Create New Action. For the Start with pull-down, select A Folder on My Computer, and choose the Letters folder you created just a moment ago with 40 extracted single-page PDFs.
From the left-hand menu, expand the Pages section, and select Insert Pages, then click the icon in the Options column to select the report file - again, for the sake of speed, I recommend having this file on your local hard drive, you can always copy it back to the network after it finishes. You'll then be asked where to insert the report. DO NOT select Prompt User unless you want to re-select the same report file for each of the 40 PDFs.
For the Save to: pull-down, create another new folder where you want the final reports to be saved (Lets call it Reports). This folder should also be on your local computer for the sake of speed.
Your window should look similar to this:
After you click Save you'll be prompted to name and describe your action. Name it something you'll recognize, and the description can be blank, or whatever you like it to be. Uncheck the Run this action after saving box.
Now, just go to File > Action Wizard and select from that list the action you created. It will bring up a box describing your action, just click Next to continue. You should see a little progress window pop up, and then after it finishes, go check your Reports folder. It should have 40 PDFs, probably with the same names as the single-page letter PDFs, but they should all have the report appended.
In Six Months
If the letters have changed, you'll need to re-export the merged letters to PDFs, and re-extract/split those into that same Letters folder.
If your updated report is still located in the same place and has the same filename as last time, you don't have to update the Action, but if you've saved a new version, you'll need to click File > Action Wizard > Edit Actions and then select the action you made six months ago, and click Edit. Click that same icon under the Options column, and point it to your new report. Re-save the action, and then run it to get a new batch of reports.
