Don't expand empty [paths] so later interpolation can do the right thing.
Example:
[paths]
default =
default-push = %(default)s
#!/bin/sh
HG=hg
"$HG" init
mkdir b
echo 'Bouncy' >b/bouncy
echo 'tricycle' >b/vehicle
"$HG" add b/bouncy
"$HG" add b/vehicle
"$HG" commit -m 'Adding bouncy'
echo 'bouncy' >>b/bouncy
"$HG" commit -m 'Making it bouncier'
"$HG" update -C 0
echo 'stationary' >>b/vehicle
"$HG" commit -m 'Clarifying the vehicle.'
"$HG" update -C 1
chmod a-w b/vehicle
"$HG" update -m 2 2>&1 | sed 's|^\(.*[ ]\).*/\([^/]*/[^/]*/[^/]*\)$|\1\2|g'