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
echo 123 > a
hg add a
hg commit -m "first" -d "1000000 0" a
mkdir sub
echo 321 > sub/b
hg add sub/b
hg commit -m "second" -d "1000000 0" sub/b
cat sub/b
hg co 0
cat sub/b 2>/dev/null || echo "sub/b not present"
ls sub 2>/dev/null || echo "sub not present"

true