diff -r 518afef5e350 -r 90487273f59c mercurial/util.py
--- a/mercurial/util.py	Tue Dec 09 09:58:13 2008 +0000
+++ b/mercurial/util.py	Wed Dec 10 00:29:10 2008 +0100
@@ -1901,7 +1901,7 @@
         _add_dir_if_not_there(seen_dirs, path)
     for root, dirs, files in os.walk(path, topdown=True, onerror=errhandler):
         if '.hg' in dirs:
-            dirs.remove('.hg') # don't recurse inside the .hg directory
+            dirs[:] = [] # don't descend further
             yield root # found a repository
             qroot = os.path.join(root, '.hg', 'patches')
             if os.path.isdir(os.path.join(qroot, '.hg')):