This is in no way the silver bullet of bug-tracking, but I have been trying it out on a couple of small projects I am working on it really suits my work flow to have the bug-reports always available within the repository.
Not having to set up a web-based tracker for each little project I embark on is a big plus (although it would limit reporting to people who check out the project using mercurial, which is a big minus).
The "lightweightedness" means it won't contain any bells or whistles, but simplicity can be very liberating as well.
I mostly use it as a "memory" of what I have yet to do, and for that simple requirement, it is perfect.