Closing this, please reopen if it's still a problem in tip.

Cannot reproduce it with crew-f08373b3e477 (source version).

I answer under a new account my mail answer did not arrive (I suppose it is
linked to bug 555).

I use 0.9.3 (latest windows installer hg version answers (version
0.9.3+20061222)). I see this behaviour for hg add, hg status, but not hg pull or
hg update.

my Path is

C:\msys\1.0\bin;C:\WINDOWS\system32;C:\WINDOWS;C:\WINDOWS\System32\Wbem;       
                                                                      
C:\Program Files\Microsoft Platform SDK\Bin\.;                                 
                                                                      
C:\Program Files\Microsoft Platform SDK\Bin\WinNT\.;                           
                                                                      
E:\tools\Mercurial;                                                            
                                                                      
T:\xreleases\bin;                                                              
                                                                      
T:\releases\internal_sdk\sdk\bin;                                              
                                                                      
E:\edavid\bin;E:\tools\XEmacs\XEmacs-21.4.19\i586-pc-win32;                    
                                                                      
C:\Program Files\Microsoft Visual Studio\Common\Tools\WinNT;                   
                                                                      
C:\Program Files\Microsoft Visual Studio\Common\MSDev98\Bin;                   
                                                                      
C:\Program Files\Microsoft Visual Studio\Common\Tools;                         
                                                                      
C:\Program Files\Microsoft Visual Studio\VC98\bin;                             
                                                                      
E:\tools\svn-win32-1.4.3\bin;                                                  
                                                                      
C:\Program Files\Microsoft Platform SDK\Bin\.;                                 
                                                                      
C:\Program Files\Microsoft Platform SDK\Bin\WinNT\. 

I removed the msys directory form the path, but behaviour was still the same.

What version are you using?  I tried using 0.9.2, 0.9.3 and the latest 0.9.3 with 
patches (installer versions) and didn't see the problem (at root of drive C:).

When repository is at toplevel of a disk (eg. T:\) hg commands eat the first
letter of every file or repository at top level, making it impossible to add or
get status.

(ie. if there is a "external" directory, hg add will give 
"xternals/zkm/readme.txt does not exist" when the file is
"externals\zkm\readme.txt).