I\'ve seen the other Mercurial case-folding Answers on StackOverflow - they say that if you have access to a case sensitive file system like unix then check out there and it
To get a case folding issue on windows I'm guessing that you've got the differing cases in different branches or heads in the repo, and it becomes a problem when merging. I can't see how (on Windows) you would actually get two different cases in the same revision without going via a unix box.
So, if they are in different revisions then you can do something like this:
hg update
hg remove -A -f "Some File"
then the merge would succeed ok. The -A is for 'after', and the -f will 'force'.