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 a
echo a > a/a
hg --cwd a ci -A -m a
hg clone a b
echo b > b/b
hg --cwd b ci -A -m b
chmod 100 a/.hg
hg --cwd b push ../a
chmod 700 a/.hg