We tried using Darcs at work in 2006, but the early exponential merge issues made it impossible to use. (One time, we let Darcs try to merge "some changes" over the weekend, but it never completed.) Unfortunately we chose Subversion instead.
I loved it for small repos and my private work, but it just wasn't ready for larger code bases. Perhaps it is now, but in the meantime git got much, much better and I'm not looking to switch back.
Darcs got too popular too early and was hurt for it (although then again, its relative popularity at the time was also a good way for us to ferret out issues). We've now shrunk back to a more reasonable size (which makes it a bit harder to keep going, but takes off some of the pressure too, double-edged)
I think darcs suffered because it set high expectations. I remember being fascinated with the "theory of patches". The web site looked very promising. And it was written in Haskell, so it had to be correct, right? :-)
I liked the simplicity of the command-line interface of darcs. I just never looked around for 1M+ LOC projects using it on a daily basis. I should have been more careful.
I still use darcs for a number of small things and I'm happy with it. I'm happier with Git, mostly because of its practical approach and the freedom it offers ("text is just text" and "you own your history, do whatever you want to it").
Still, I would like to use git as my svn client, but it's just not a suitable replacement without externals handled nicely.
As an aside, I changed jobs to another place using SVN, and when they started moving to Git I changed jobs again. Still using SVN! :-)