I've checked my TortoiseHG settings and it's set to show the folder icons showing the status of the files, but I don't see them. I'm running Windows 7, does anyone know what could be the problem?
I've had this problem before. It's important to reboot after freshly installing TortoiseHG (or possibly just logoff and logon again.)
If this doesn't work, then it's possible that you have too many icon overlays types being used by various progams.
This tortoisesvn discussion talks about maxing out icon overlays.
I think the registry entries that TortoiseHG uses in HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\explorer\ShellIconOverlayIdentifiers are 1TortoiseNomal, 2TortoiseModified, 3TortoiseConflict, etc...
You need to make sure that there aren't too many icon overlays before these. Of course this could break other overlays!