This seems to be working for me. You have your diff tools working (ie normally configured FileMerge etc are working for diffs and merges right?)
[This is the originator of the bug under personal account instead of project owner account]
Upon further investigation, it looks like /Library/Application Support/hgrc does not have any extensions listed in it. I added "rebase = " to the extensions, and it worked. There may be other extensions that need to be listed, but I haven't bumped into any other errors so far.