diff -r 04e1e6743809 -r e1401c74572f mercurial/subrepo.py
--- a/mercurial/subrepo.py	Sun Feb 07 15:31:53 2010 +0100
+++ b/mercurial/subrepo.py	Sat Feb 06 19:14:37 2010 +0100
@@ -183,7 +183,8 @@
             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.write('[paths]\ndefault = %s\n' % os.path.join(
+                _abssource(ctx._repo), path))
             f.close()
         self._repo._subparent = r
         self._repo._subsource = state[0]