Last week, we had the author of TDD for a Shopping Website LiveProject. Friday at 11am Ranch time, Steven Solomon will be hosting a live TDD session just for us. See for the agenda and registration link
Looks like you have not specified the correct URL for the Mercurial repository. Correct that and is should work. Just remember that the URL you specify in Jenkins is the URL that gets used by the Jenkins build slave, thus "localhost" works only if Mercurial and the Jenkins build slave are on the same machine.