diff -r a02d43acbc04 -r 8f14f749f471 mercurial/subrepo.py
--- a/mercurial/subrepo.py	Mon Dec 07 12:44:15 2009 -0500
+++ b/mercurial/subrepo.py	Mon Dec 14 15:01:13 2009 -0600
@@ -160,6 +160,9 @@
         else:
             util.makedirs(root)
             self._repo = hg.repository(r.ui, root, create=True)
+            f = file(os.path.join(root, '.hg', 'hgrc'), 'w')
+            f.write('[paths]\ndefault = %s\n' % state[0])
+            f.close()
         self._repo._subparent = r
         self._repo._subsource = state[0]