Don't mark files with 'm'erge unless we're actually merging branches For 3-way merges, we were marking files as 'm', which should only be used for branch merges. This was causing files to show up in 'hg status' that aren't actually modified.

#!/bin/sh

hg init
echo 123 > a
hg add a
hg commit -m "first" -d "0 0" a
mkdir sub
echo 321 > sub/b
hg add sub/b
hg commit -m "second" -d "0 0" sub/b
cat sub/b
hg co 0
cat sub/b
ls sub

true