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.

#!/bin/sh

echo "[extensions]" >> $HGRCPATH
echo "convert=" >> $HGRCPATH

hg init a
cd a
echo a > a
hg ci -d'0 0' -Ama
hg cp a b
hg ci -d'1 0' -mb
hg rm a
hg ci -d'2 0' -mc
hg mv b a
hg ci -d'3 0' -md
echo a >> a
hg ci -d'4 0' -me

cd ..
hg convert a 2>&1 | grep -v 'subversion python bindings could not be loaded'
hg --cwd a-hg pull ../a