See: http://stackoverflow.com/questions/7626904/first-character-truncated-when-committing-hgsub This can be reproduced by creating a repo in a Windows drive root and adding a subrepo. The resulting contents of .hgsubstate are correct, so the bug appears to be harmless.
Fixed by http://selenic.com/repo/hg/rev/fccd350acf79 Matt Mackall <mpm@selenic.com> subrepo: fix repo relative path calculation for root directories (issue3033) (please test the fix)
--- Bug imported by bugzilla@serpentine.com 2012-05-12 09:24 EDT --- This bug was previously known as _bug_ 3033 at http://mercurial.selenic.com/bts/issue3033