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Install Mercurial using the virtualenv tool that is outlined in the Installing Django documentation, but replacing "django" with "mercurial". It is recommended that you create a separate instance/virtual host for running a mercurial server to isolate the environment.
Once installed you'll need to create a ".wsgi" script that looks something like:
...
Checking back in the web interface you can verify that the change has been committed.
If
You can also request that kproxy be enabled for your Mercurial server.
you need to install a custom egg that is not distributed through PyPy you'll need to specify the full path to the directory that contains the egg and its "setup.py" file. 
