Interesting - I was trying to get this concept to work a few years ago after I got a live SVN/Mercurial translator working, but it was very hard due to all the differences they note in this post.

One thing they don't mention is "octopus merges" - Git allows a merge to have more than two parents, while Mercurial does not. I'm sure there are other tiny edge cases, too; I wonder how they handle those?

Perhaps more to the point, I'm concerned that this means you're stuck using the lowest common denominator of both systems - for example, no hg bigfiles stuff.