Windows WebDAV support can be shaky. It's very possible that because of mercurial's likely advanced file-system operations, the OS does something incorrectly, or something apache's mod_dav cannot cope with.
It's also possible that something simpler is wrong, like apache blocking access to paths starting with a .
.
You may be able to find something in your apache log, but I would recommend not doing this and use a true mercurial server instead.