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Mercurial is functioning as it is designed, but with Grails, there are folders that are not copied with a clone that are required (Groovy Source Packages, Java Source Packages, Tag Libraries) if they are empty. Upon a clone, run or test of the app will not work without these folders. Manual intervention is required to copy/create these. Would be nice if (since it is a grails project) there was a prompt for the creation of these folders at the time of clone, or if they were simply created (as they are with a new grails project).
"grails upgrade" should help after checkout.