merge program setting from hgrc wasn't used.
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#!/bin/sh -x
hg init
echo This is file a1 > a
hg add a
hg commit -t "commit #0" -d "0 0" -u user
echo This is file b1 > b
hg add b
hg commit -t "commit #1" -d "0 0" -u user
hg update 0
echo This is file c1 > c
hg add c
hg commit -t "commit #2" -d "0 0" -u user
hg update -m 1
rm b
echo This is file c22 > c
hg commit -t "commit #3" -d "0 0" -u user