Um trecho de o wiki do HG :
If an older Mercurial version tries to access a repository that was created by a newer Mercurial version, an error message like
abort: requirement 'dotencode' not supported!
may be displayed, which means the Mercurial version used to access that repository doesn't know how to interpret it, because accessing it would require knowledge about the 'dotencode' capability.
If such an error message appears, a newer Mercurial version must be used to access the repository or the repository must be converted to an older format understood by that version (by using 'hg clone --pull')
Isso não parece relevante, já que sua versão do cliente parece ser maior do que a do servidor (acho que você deveria verificar isso), mas vale a pena tentar essa receita mesmo assim.