On win98 os.path.expanuser('~') does not result in a useable directory. The MSDN recommendation for user specific directories is the use of shell.ShGetSpecialFolder, so use it. For details see: http://msdn.microsoft.com/library/default.asp?url=/library/en-us/shellcc/platform/shell/reference/functions/shgetspecialfolderpath.asp

#!/bin/sh

hg init
python -c 'print "confuse str.splitlines\nembedded\rnewline"' > a
hg ci -Ama -d '1 0'
echo clean diff >> a
hg ci -mb -d '2 0'
hg diff -r0 -r1