How do you configure it to ignore files?

Ignore is configured in a normal text file called .hgignore in the root of your repository. Add it just like a normal file with:

hg add .hgignore

There are two syntax options available for file matching, glob and regexp. glob is unix-like filename expansion and regexp is regular expressions. You activate each by adding syntax: glob or syntax: regexp on a line by itself. All lines following that will use that syntax, until the next syntax marker. You can have as many syntax markers as you want. The default syntax is regexp, so if you only use regexp you don't need any syntax marker.

You can add comments with #

Example:

# python temporary files
syntax: glob
*.pyc

#editor autosaves
*~

# temporary data
syntax: regexp
temp

Ignore only applies to unmanaged files (i.e. files that are not already checked in). To ignore files that are under version control, you can use the switches -I and -X.

Enable the "strip" extension and type the following:

hg strip #changeset# --keep

Where #changeset# is the hash for the changeset you want to remove. This will remove the said changeset including changesets that descend from it and will leave your working directory untouched. If you wish to also revert your committed code changes remove the --keep option.

For more information, check the Strip Extension.

If you get "unkown command 'strip'" you may need to enable it. To do so find the .hgrc or Mercurial.ini file and add the following to it:

[extensions]
strip =

Note that (as Juozas mentioned in his comment) having multiple heads is normal workflow in Mercurial. You should not use the strip command to battle that. Instead, you should merge your head with the incoming head, resolve any conflicts, test, and then push.

The strip command is useful when you really want to get rid of changesets that pollute the branch. In fact, if you're in this question's situation and you want to completely remove all "draft" change sets permanently, check out the top answer, which basically suggests doing:

hg strip 'roots(outgoing())'