Tech Tip: Getting hgsubversion to Work with subversion-1.7.x
In order to fix it, just install subvertpy, which provides alternative python bindings for subversion, which hgsubversion prefers by default, and with which it works fine under subversion-1.7.x.
I discovered all that after I attempted to fix it the hard way by installing subversion-1.6.x under /opt/svn-1.6.x, which required building an old version of SWIG, and then setting PATH, LD_LIBRARY_PATH, and PYTHONPATH and then having to remove the global python-svn bindings from under /usr/lib (as root!) because hgsubversion did not like them, a process which took me an entire evening and was frustrating and was ridden with a lot of trial and error, so I would not recommend it.
Hope it helps. Also see this hgsubversion bug report.