It seems that when you clone a sub-tree of a repository over svn+ssh, it will still root the hg repository at the svn root, rather than having the hg root be the sub-tree of the original repository. It will only clone the files in the requested directory. As an example:
$ hg clone svn+ssh://my.host.com/svn/root/sub/directory
results in an hg repository with sub/directory/*, rather than just all of the files in "directory".
I have a hunch that it's directly related to svn+ssh, since I don't believe using that protocol is common. If it was, someone else would have seen it by now. Another user on #hgsubversion (elehack) reports the same bug, also over svn+ssh. Local clone seems to work fine.