I want to set up a Mercurial SC server and have been following the instructions found here: http//stackoverflow.com/questions/818571/how-to-setup-mercurial-and-hgwebdir-on-i
The traceback in the very long line says that mercurial isn't found in your PYTHON_PATH. Try making the hgwebdir.cgi edit as seen in step 5.1 from the HgWebDirStopByStep page.
# adjust python path if not a system-wide install:
import sys
sys.path.insert(0, "c:/dev/Mercurial/lib")
Where, of course, the path element that's being inserted is adjusted to reference wherever your mercurial library files are.