I have spotted the biggest bottleneck in "bdiff.c". Actually it was pretty easy to find after I recompiled the python interpreter and mercurial for profiling. In "bdiff.c" function "equatelines" allocates the minimum hash table size, which can lead to tons of collisions. I introduced an "overcommit" factor of 16, this is, I allocate 16 times more memory than the minimum value. Overcommiting 128 times does not improve the performance over the 16-times case.

Basic install:

 $ make            # see install targets
 $ make install    # do a system-wide install
 $ hg debuginstall # sanity-check setup
 $ hg              # see help

See http://www.selenic.com/mercurial/ for detailed installation
instructions, platform-specific notes, and Mercurial user information.