I've been using Mercurial primarily on a Mac, but also on a Windows box for a client. Since the Windows box isn't my primary platform, it tends to be under-configured/under-tricked-out. After my first conflicted hg merge, it was time to set up a merge program.
I guess Mercurial looks through the registry where it was finding some wacked out description for P4 merge. (The client currently uses P4.) It was referring to some path that didn't exist.
I have TortiseSVN on the machine from work for a different client, so I figured I'd use that merge program. Googling around, I didn't find an example, so here you go (even though it's not real hard - see MergeToolConfiguration for details):
TortoiseMerge.args=/mine:$local /theirs:$other /base:$base -o /merged:$output