Try to pass repo.ui to reposetup hooks The ui object we received in this function may belong to another repo, which could be confusing from the hook point of view. Trying to use the ui object from the newly created repo should avoid this confusion.

#!/bin/sh
hg init
echo This is file a1 > a
hg add a
hg commit -m "commit #0" -d "1000000 0"
ls
echo This is file b1 > b
hg add b
hg commit -m "commit #1" -d "1000000 0"
hg co 0
# B should disappear
ls