As of 0.9.4, when adding a symbolic link Mercurial keeps track of the link itself, and not the file or directories it points to. However, there are cases when it is desirabl
I was surprised when I found this too, but it seems to be a feature that the Mercurial team don't want to change for security reasons.
I'm planning to get around it by using rsync to update the local copy of the directory before committing, from my makefile. This isn't a great solution but my directory is quite small so it should be OK.