Try changing:
**Root repository .hgsub**
External/Engine = //Mcp/hg/Engine
**Engine repository .hgsub**
Externals/Box2d = [svn]http://box2d.googlecode.com/svn/trunk
to:
**Root repository .hgsub**
External/Engine = file://Mcp/hg/Engine
**Engine repository .hgsub**
Externals/Box2d = [svn]http://box2d.googlecode.com/svn/trunk
So that mercurial knows which type or reference your root repo is. I am assuming that it is not on a server in this case.