Sorry if this is covering old ground, but if you have simply
placed the variables in the text editor, with a space in between - 
then the line is not empty, even if the variables are.
The space is the culprit.
You must create a rule that returns nothing if that phone field is not
used, but also adds the space if so.
Something like:

HidePhoneLabelRule

if (Field("Phone1") == "")
    return "";
else
    return Field("PhoneLabel1") + " " + Field('Phone1');

If you've already done this, then I'm stuck too.

HTH

Todd

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