Assuming you're using Publisher 2003 (and I believe that 2007 is not much different):
Choose New Publication, New from Design (opens up in the left section of the Publisher window when you open the program)
Collapse Publications for Print to view your options
Click CD/DVD labels
Many options listed here on the right, all with Avery label #s listed. Choose which one you want.
You can buy the Avery labels (or their cheaper generic equivalents) at any office supply store. These labels will be a heavier grade weight of paper than standard 20 lb., so they're better as CD sleeves than plain paper.Edit
: I re-read your post and realized that you had already created the publication. I see from your image that you did it on a standard 8.5 x 11 document. It's going to be difficult to adjust that. Usually if you want to create a custom print publication, you need to set your print options prior
to actually creating any fields or designs on the publication itself.
To create a custom-sized layout, choose File --> Page Setup --> Layout --> Custom. Enter in your exact
paper width and height, making sure to select if it is portrait or landscape.
At that point, you can begin creating your design. Otherwise Publisher will re-adjust whatever you have done (scaling it down in size) to the smaller dimensions.
Edited by txtchr, 17 July 2009 - 02:23 PM.