hg clone -r (parent1 of bad merge) -r (parent2 of bad merge) old new

[extensions]
hgext.mq=

$ hg qimport -r changesetN:tip
  # This will add all of your changes since the merge to the queue
$ hg qpop -a
  # This pops them all out of your history.
$ hg strip changesetM
  # This removes the merge changeset.
$ hg update -C default
  # Make sure we're on the default branch
$ hg qpush -a
  # Take the changesets in the queue and push them back onto your history.
$ hg qfinish -a
  # Remove changesets from the queue and finalize them as normal changesets.