Don't expand empty [paths] so later interpolation can do the right thing.
Example:
[paths]
default =
default-push = %(default)s
#!/bin/sh
mkdir a
cd a
hg init
echo foo > t1
hg add t1
hg commit -m "1" -d "0 0"
cd ..
hg clone a b
cd a
echo foo > t2
hg add t2
hg commit -m "2" -d "0 0"
cd ../b
echo foo > t3
hg add t3
hg commit -m "3" -d "0 0"
hg push ../a
hg pull ../a
hg push ../a
hg up -m
hg commit -m "4" -d "0 0"
hg push ../a