help: it is 'file://localhost/', not 'file://local/'
The documentation has apparently always been wrong.
--- a/mercurial/help/urls.txt Tue Nov 15 14:25:11 2011 -0600
+++ b/mercurial/help/urls.txt Wed Nov 16 00:10:52 2011 +0100
@@ -1,7 +1,7 @@
Valid URLs are of the form::
local/filesystem/path[#revision]
- file://local/filesystem/path[#revision]
+ file://localhost/filesystem/path[#revision]
http://[user[:pass]@]host[:port]/[path][#revision]
https://[user[:pass]@]host[:port]/[path][#revision]
ssh://[user@]host[:port]/[path][#revision]