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
cd a
hg init b
echo x > b/x
echo '# should print nothing'
hg st
echo '# should print ? b/x'
hg st b/x

hg add b/x

echo '# should print A b/x'
hg st
echo '# should forget b/x'
hg revert
echo '# should print nothing'
hg st b