man 5 hgrc implied you need to use external tools to do CRLF translation.
This is no longer true; win32text provides a much better in-process alternative.
#!/bin/sh -e
umask 027
mkdir test1
cd test1
hg init
touch a b
hg add a b
hg ci -m "added a b" -d "1000000 0"
cd ..
hg clone test1 test3
mkdir test2
cd test2
hg init
hg pull ../test1
hg co
chmod +x a
hg ci -m "chmod +x a" -d "1000000 0"
echo % the changelog should mention file a:
hg tip --template '#files#\n'
cd ../test1
echo 123 >>a
hg ci -m "a updated" -d "1000000 0"
hg pull ../test2
hg heads
hg history
hg -v merge
cd ../test3
echo 123 >>b
hg ci -m "b updated" -d "1000000 0"
hg pull ../test2
hg heads
hg history
hg -v merge
ls -l ../test[123]/a > foo
cut -b 1-10 < foo
hg debugindex .hg/store/data/a.i
hg debugindex ../test2/.hg/store/data/a.i
hg debugindex ../test1/.hg/store/data/a.i