Your setting is displayed correctly.
This is a symptom of not having a copy of the file in the base revision, in which case Mercurial acts as if the file was present but was empty.
, . , :
$ hg log -r "ancestor(p1(), p2())"
.. , :
$ hg manifest -r <rev> | grep <your file>
.., , .
"hg merge --debug" "hg update --debug", , ( /).
, Mercurial, ( ):
https://www.mercurial-scm.org/wiki/BugTracker