My Mercurial installation is in /usr/local/bin/hg, but I can't browse to that file. That is the location to which the Mercurial installation program put it.
In Preferences > Mercurial, when you click 'Use System Mercurial', SourceTree will detect the location of the system Mercurial for you but then let you browse if you want to change it.
Note, however, that Mercurial is actually a set of Python packages. The 'hg' command that you call is actually just a very thin wrapper which launches these packages. That's why the 'Use System Mercurial' dialog will probably open at /Library/Python/2.7/site-packages/mercurial - that's actually where the real Mercurial software is, and it's also where the Mercurial installer puts 99% of the files it installs. It's this which is the unambiguous part of the Mercurial install, not the hg script.
/Library/Python/2.7/site-packages/mercurial isn't where homebrew puts it - what directory should homebrew users select in this dialog?
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mine is located at /opt/local/Library/Frameworks/Python.framework/Versions/2.7/lib/python2.7/site-packages/mercurial
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this works for homebrew: /usr/local/lib/python2.7/site-packages/mercurial/
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