I have a problem with a merge that aborts with an error. I have two changesets, in one 'x' is a symlink and in the 
other a normal file. If I merge the symlink changeset into the changeset where 'x' is a normal file, the merge 
command will abort with:

   abort: could not symlink to '': No such file or directory: /tmp/repo/x

Note that the merge works if the merge is the done in the other direction. It will then (as I expect) prompt to take 
local or other.

The problem can be demonstrated with the following command sequence.

$ hg init
$ touch target
$ hg com -Ambase
adding target
$ ln -s target x
$ hg com -Amlink
adding x
$ hg update 0
$ touch x
$ hg com -Amfile
adding x
created new head
$ hg merge

The problem is with 2.0.2 on Linux